Most Canadian mutual funds still strongly support management on shareholder resolutions, though there are signs of some movement away from that trend, according to a report by the Shareholder Association for Research and Education (SHARE) and Fund Votes.
For example, the second annual Proxy Voting by Canadian Mutual Funds report notes that Canadian mutual funds are more likely to oppose the election of directors put forward by corporate management than in previous years. And note the success of this year's "Say on Pay" campaign (not included in the report), which will allow shareholders of Canada's big banks an advisory vote on executive compensation starting next year.
“Canadians depend on mutual fund companies to protect their retirement savings and studies have shown repeatedly that careful proxy voting adds value and manages risk for investors,” says SHARE’s Laura O’Neill. “At this time of battered financial markets and depressed shareholder value, it is a positive sign that more funds are challenging management’s hold on the ballot.”
The report found that three mutual fund companies stood out from the crowd. “Among their peers, Inhance Asset Management, Meritas Mutual Funds, and Northwest & Ethical Funds, were significantly more likely to vote against management,” the report notes. “The three companies are known for integrating environmental, social and governance factors into their investment decisions.” Inhance, Meritas and Northwest & Ethical voted in favour of shareholder proposals on at least 40% of all ballots and each also withheld support from management on at least one in five resolutions.
However, those three companies are the exceptions. Canadian mutual funds supported management about 90% of the time. Eighteen of 21 fund families rejected more than 80% of the shareholder proposals they voted on.
And the report turned out a few anomalies of interest to SRI investors, especially those who are invested in SRI products from fund companies that are not SRI-exclusive or SRI specialists. For instance, the proxy voting records of SRI funds sold by diversified fund companies are likely to be the same. “We looked for evidence that SRI funds would report voting in favour of corporate social responsibility proposals more heavily than non-SRI funds in the same family. With notable exceptions, we found that this was not the case.”
“When you invest in a fund from an SRI family, you can count on very progressive proxy voting,” O’Neill said. “We found that in most cases, an SRI product managed within a non-SRI fund family votes in the same management-friendly way for all of its funds.”
Canadian fund companies have been required to publicly disclose their proxy voting records since 2006. The SHARE/Fund Votes report is available here.
Tuesday, June 30, 2009
Friday, June 26, 2009
The Kimberley Process - what now?
The Kimberley Process is in trouble. Established in 2003, it is a joint initiative by governments, industry and civil society to prevent trade in conflict or ‘blood’ diamonds. Countries that participate pass legislation to enforce the Kimberley Process and set up control systems for the import and export of rough diamonds.
Partnership Africa Canada (PAC) was one of the key players in the creation of the Kimberley Process. Ian Smellie, a research co-ordinator with PAC, resigned earlier this month, unable to tolerate continued inaction by the Kimberley Process in the face of ongoing human rights abuses. Susanne Emond from PAC said "The Kimberley Process must fulfill its potential to ensure a clean diamond trade. We are calling on the diamond industry to join with us in demanding that governments enforce the scheme's rules with greater commitment and timeliness."
The sixth Intersessional meeting of the Kimberley Process Certification Scheme took place this week in Windhoek, Namibia. There was significant concern that the Kimberly Process is not addressing serious cases of non compliance among members. An address by the World Diamond Council stated, “The fact is that to be truly effective, the Kimberley Process requires full political and logistical support from its member states and international institutions, and the wider international community. With only a few exceptions, there is little evidence to suggest that the Kimberley Process is receiving this level of support. It is therefore, unsurprising that events and activities associated with the illegal appropriation of valuable natural resources go unchecked.”
Human rights organizations are distressed about the continued abuses in Zimbabwe, Angola and the DRC among others. Venezuela’s government, for example, has promised to halt diamond smuggling, but it is still going on. The current situation in Zimbabwe’s Marange diamond fields is being closely followed. In March, a team from the Kimberley Process visited Zimbabwe to discuss concerns about smuggling and illicit trade activities. The Kimberley Process Certification Scheme Secretariat reported ” The High Level Envoy Teams visit was a great success as the Team sternly delivered the intended message at a high level within the Government.”
However, Human Rights Watch released a report today, ‘Diamonds in the Rough’ which states “Following the discovery of diamonds in Marange in June 2006, the police and army have used brutal force to control access to the diamond fields and to take over unlicensed diamond mining and trading. Some income from the fields has been funneled to high-level party members of ZANU-PF, which is now part of a power-sharing government that urgently needs revenue as the country faces a dire economic crisis.”
The Kimberley Process is at a crossroads. As Annie Dunnebacke from Global Witness, said: "The clock is running out on Kimberley Process credibility. The work it was set up to do is vital - it would be scandalous if uncooperative governments and industry succeeded in hobbling it into ineffectiveness".
Partnership Africa Canada (PAC) was one of the key players in the creation of the Kimberley Process. Ian Smellie, a research co-ordinator with PAC, resigned earlier this month, unable to tolerate continued inaction by the Kimberley Process in the face of ongoing human rights abuses. Susanne Emond from PAC said "The Kimberley Process must fulfill its potential to ensure a clean diamond trade. We are calling on the diamond industry to join with us in demanding that governments enforce the scheme's rules with greater commitment and timeliness."
The sixth Intersessional meeting of the Kimberley Process Certification Scheme took place this week in Windhoek, Namibia. There was significant concern that the Kimberly Process is not addressing serious cases of non compliance among members. An address by the World Diamond Council stated, “The fact is that to be truly effective, the Kimberley Process requires full political and logistical support from its member states and international institutions, and the wider international community. With only a few exceptions, there is little evidence to suggest that the Kimberley Process is receiving this level of support. It is therefore, unsurprising that events and activities associated with the illegal appropriation of valuable natural resources go unchecked.”
Human rights organizations are distressed about the continued abuses in Zimbabwe, Angola and the DRC among others. Venezuela’s government, for example, has promised to halt diamond smuggling, but it is still going on. The current situation in Zimbabwe’s Marange diamond fields is being closely followed. In March, a team from the Kimberley Process visited Zimbabwe to discuss concerns about smuggling and illicit trade activities. The Kimberley Process Certification Scheme Secretariat reported ” The High Level Envoy Teams visit was a great success as the Team sternly delivered the intended message at a high level within the Government.”
However, Human Rights Watch released a report today, ‘Diamonds in the Rough’ which states “Following the discovery of diamonds in Marange in June 2006, the police and army have used brutal force to control access to the diamond fields and to take over unlicensed diamond mining and trading. Some income from the fields has been funneled to high-level party members of ZANU-PF, which is now part of a power-sharing government that urgently needs revenue as the country faces a dire economic crisis.”
The Kimberley Process is at a crossroads. As Annie Dunnebacke from Global Witness, said: "The clock is running out on Kimberley Process credibility. The work it was set up to do is vital - it would be scandalous if uncooperative governments and industry succeeded in hobbling it into ineffectiveness".
Wednesday, June 24, 2009
The Eco Bottom Line: Making Money
The first of a two part Green event organized by IFIC, yesterday’s breakfast featured Hadley Archer from the WWF and Elizabeth McGeveran from F&C Asset Management discussing how climate change is impacting the investment industry.
Hadley Archer, WWF’s Vice President of Strategic Partnerships, examined corporate social responsibility, and placed it in the context of WWF's Climate Savers Program, 22 companies that are working hard to reduce their environmental footprint. Archer hopes that these companies are also setting new and higher standards in their respective sectors, and preliminary research shows this to be the case.
Quoting work done by Michael Porter at Harvard Business School, Archer talked about how corporations need to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices. Then they would recognize that CSR is not a cost or a constraint but rather a source of innovation and competitive advantage.
If the era of cheap resources is over (as everyone is warning us, most recently Jeff Rubin), then addressing carbon emissions will become a corporate advantage, or disadvantage. As companies come to terms with managing carbon risk, they will also have to look at carbon risk in their supply chains, asking suppliers down the line ‘what are you doing to manage carbon costs and risk?’.
What does it take to provide leadership on climate change? Archer suggests a company needs a holistic climate change strategy to reduce GHG emissions; targets, measuring and transparent reporting; investing in new technologies; and researching emerging areas.
Elizabeth McGeveran then took us through how F&C Asset Management looks at green business through the money management lens. She spoke specifically of their climate change mandate, which they manage for many investors around the world, and which is offered through Scotia in Canada.
Key drivers such as regulation, corporate and consumer behaviour and the physical effects of the changing climate are presenting us with global climate investment opportunities. She stressed that it is a very dynamic playing field, but nonetheless gave us some tips on who the winners will be.
In a world of climate change, which companies are poised to benefit? The first group are those whose products or services are mitigating the effects of climate change. This includes companies in alternative energy, energy efficiency, sustainable mobility and waste management. The second group are those who are involved in adaptation, where opportunities present themselves in water and food. The third and final group is supporting services, the consultants, the carbon traders etc.
McGeveran made the point that companies in the climate change portfolio are not necessarily environmental best actors. For example, nuclear power companies, which are excluded from many Canadian SRI mandates, are part of the climate change fund. As with so much of SRI, ‘it’s all about the trade offs’.
Hadley Archer, WWF’s Vice President of Strategic Partnerships, examined corporate social responsibility, and placed it in the context of WWF's Climate Savers Program, 22 companies that are working hard to reduce their environmental footprint. Archer hopes that these companies are also setting new and higher standards in their respective sectors, and preliminary research shows this to be the case.
Quoting work done by Michael Porter at Harvard Business School, Archer talked about how corporations need to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices. Then they would recognize that CSR is not a cost or a constraint but rather a source of innovation and competitive advantage.
If the era of cheap resources is over (as everyone is warning us, most recently Jeff Rubin), then addressing carbon emissions will become a corporate advantage, or disadvantage. As companies come to terms with managing carbon risk, they will also have to look at carbon risk in their supply chains, asking suppliers down the line ‘what are you doing to manage carbon costs and risk?’.
What does it take to provide leadership on climate change? Archer suggests a company needs a holistic climate change strategy to reduce GHG emissions; targets, measuring and transparent reporting; investing in new technologies; and researching emerging areas.
Elizabeth McGeveran then took us through how F&C Asset Management looks at green business through the money management lens. She spoke specifically of their climate change mandate, which they manage for many investors around the world, and which is offered through Scotia in Canada.
Key drivers such as regulation, corporate and consumer behaviour and the physical effects of the changing climate are presenting us with global climate investment opportunities. She stressed that it is a very dynamic playing field, but nonetheless gave us some tips on who the winners will be.
In a world of climate change, which companies are poised to benefit? The first group are those whose products or services are mitigating the effects of climate change. This includes companies in alternative energy, energy efficiency, sustainable mobility and waste management. The second group are those who are involved in adaptation, where opportunities present themselves in water and food. The third and final group is supporting services, the consultants, the carbon traders etc.
McGeveran made the point that companies in the climate change portfolio are not necessarily environmental best actors. For example, nuclear power companies, which are excluded from many Canadian SRI mandates, are part of the climate change fund. As with so much of SRI, ‘it’s all about the trade offs’.
Tuesday, June 23, 2009
Few companies report on indigenous rights: EIRIS
Investors should take a close look at how corporations are dealing with the critical issue of indigenous risks, according to a recent report from EIRIS (Experts in Responsible Investment Solutions).
“Indigenous rights are a human rights issue that companies and their investors should take into account,” the EIRIS report states. The U.K.-based independent researcher analyzed the impact and response of 250 listed companies on the FTSE All World Developed Index considered to have a high or medium risk exposure to indigenous rights.
Firms operating in the extractive sector (such as oil and gas, mining, etc.) and high indigenous risk countries (e.g., Canada, Australia, the United States, South Africa, New Zealand) were identified as medium risk for indigenous rights exposure.
Companies accused of indigenous rights abuse within the past three years were identified as high risk. Of the 250 companies analyzed, 83% were medium risk and 17% were high risk.
“The highest risk companies for indigenous rights are not adequately responding to risks and opportunities,” the report notes, adding that only 7% of companies identified as high risk responded to indigenous rights issues at the corporate level; 62% reported no corporate response whatsoever.
In fact, few companies report on indigenous rights issues and when they do, the quality of reporting is generally poor, EIRIS notes. “Whilst most companies provide a response to allegations of breaches of indigenous rights, few report voluntarily on areas of non-compliance.”
EIRIS used a number of factors in its assessment, including company policies on indigenous rights, free prior informed consultation/consent (a consultative process which companies undertake before commencing operations that are likely to disrupt indigenous communities), employment and resettlement.
Given the level of attention on indigenous rights, the report states, as well as the introduction of laws and regulation in many countries, companies with strong commitments and effective engagement processes will undoubtedly benefit in an environment where access to land and resources is becoming increasingly restricted.
For companies that choose to ignore indigenous rights, the risks are high. For example, earlier this year the U.K.’s Co-operative Bank announced that it would fund a legal challenge by the Beaver Lake Cree Nation against oil and gas companies on the basis that oil sands extraction in Canada is destroying indigenous peoples’ hunting and fishing lands and resources. Mutual fund company Ethical Funds has identified health concerns as the most pressing issue facing indigenous peoples living in and around Alberta’s 140,000 square kilometre oil sands region.
The full EIRIS report is available here.
“Indigenous rights are a human rights issue that companies and their investors should take into account,” the EIRIS report states. The U.K.-based independent researcher analyzed the impact and response of 250 listed companies on the FTSE All World Developed Index considered to have a high or medium risk exposure to indigenous rights.
Firms operating in the extractive sector (such as oil and gas, mining, etc.) and high indigenous risk countries (e.g., Canada, Australia, the United States, South Africa, New Zealand) were identified as medium risk for indigenous rights exposure.
Companies accused of indigenous rights abuse within the past three years were identified as high risk. Of the 250 companies analyzed, 83% were medium risk and 17% were high risk.
“The highest risk companies for indigenous rights are not adequately responding to risks and opportunities,” the report notes, adding that only 7% of companies identified as high risk responded to indigenous rights issues at the corporate level; 62% reported no corporate response whatsoever.
In fact, few companies report on indigenous rights issues and when they do, the quality of reporting is generally poor, EIRIS notes. “Whilst most companies provide a response to allegations of breaches of indigenous rights, few report voluntarily on areas of non-compliance.”
EIRIS used a number of factors in its assessment, including company policies on indigenous rights, free prior informed consultation/consent (a consultative process which companies undertake before commencing operations that are likely to disrupt indigenous communities), employment and resettlement.
Given the level of attention on indigenous rights, the report states, as well as the introduction of laws and regulation in many countries, companies with strong commitments and effective engagement processes will undoubtedly benefit in an environment where access to land and resources is becoming increasingly restricted.
For companies that choose to ignore indigenous rights, the risks are high. For example, earlier this year the U.K.’s Co-operative Bank announced that it would fund a legal challenge by the Beaver Lake Cree Nation against oil and gas companies on the basis that oil sands extraction in Canada is destroying indigenous peoples’ hunting and fishing lands and resources. Mutual fund company Ethical Funds has identified health concerns as the most pressing issue facing indigenous peoples living in and around Alberta’s 140,000 square kilometre oil sands region.
The full EIRIS report is available here.
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