Active Ownership

University Network for Investor Engagement (UNIE)

The University of Victoria and the University of Victoria Foundation are committed to participating in collective engagement through UNIE. Its goal is to engage on behalf of Canadian Universities to ensure companies are addressing climate risk and greenhouse gas emissions. UNIE will engage with public companies to focus on key sectors where advocacy can make the biggest difference, including finance, transportation, energy and utilities and manufacturing. Activities will include meeting with company shareholders to discuss improvement strategies for their environmental, social and governance (ESG) policies.

The initiative’s aim is to reduce greenhouse gas emissions and accelerate the transition to a low-carbon economy.

UNIE is a collective engagement program created by the Shareholder Association for Research and Education (SHARE). SHARE is a leading not-for-profit organization in responsible investment services.

Proxy Voting

Proxy voting is another essential tool in our commitment to responsible investing. The Board has delegated voting rights to be exercised by the investment managers. Equity investment managers are expected to vote all proxies in the best interests of the Foundation. The proxy voting activity of our investment managers demonstrates that they continue to remain active participants within their equity portfolios. Our managers are requested to report regularly on their proxy voting activity.

The most common types of proxy votes are:

  • Board Opposition,
  • Say on Pay Opposition, and;
  • Shareholder Proposal Support.

Regular Investment Manager Reporting

The Board requests that its investment managers provide reports on ESG practice integration. These reports include information on any ESG issues that have been identified and discussed with management of companies in the portfolio as well as proxy voting updates. Key examples of disclosures from each investment manager are included below.

Walter Scott

Walter Scott’s incorporation of ESG principles into each aspect of managing our client’s money, extends to the manner in which we exercise discretionary proxy voting authority; simply put, the safeguarding of the interests of clients is paramount. So, notwithstanding the investment merits of the Company, we took exception to the company’s proposed remuneration package for CEO, or more accurately, the conditions under which it would be awarded. As a matter of course, and as is the case with all holdings, our close engagement with the company allowed us to put forward our views and concerns directly to management.

The CEO has performed well at the Company. However, we asked to have a call with the company to discuss the shareholder vote regarding the granting of shares, to keep him at the Company until the end of 2021 and thereby seeing a major merger through.

We voted against the proposal on behalf of our clients. We believed that 50th percentile TSR target, relative to the S&P 500, was not stringent enough to merit a 100% pay-out. The quantum of the award was excessive in our view, and we did not believe it to be aligned with shareholder’s best interests as there may have been a situation where the share price fell and the CEO would have received the full award. Despite some management protestations to the contrary, we did not see this as a vote of no confidence in the merger, as we would like to see the CEO remain in his position until 2021. The proposal was subsequently rejected by shareholders, and the board has undertaken to consider the consequences of the vote in future remuneration awards.

Hexavest

Hexavest signed an investors’ statement asking General Electric to reconsider its recently announced plan to acquire an interest in the controversial Lamu coal-fired power plant in Kenya, Lamu having been designated a world heritage site by UNESCO. This coal power plant especially threatens the ecosystem and health of local communities

Hexavest signed an Investors’ Statement calling on Standard Chartered to strengthen its policy regarding coal. More precisely, the statement demanded that the bank integrate into its new policy:

1) a prohibition on financing projects in new coal mines and new coal-fired power plants across the planet;

2) a prohibition on offering general financing and consulting services to companies that are highly dependent on coal extraction or production;

3) a clear plan with specified timeframes for eliminating its existing exposure to coal-related assets.

Macquarie

The MEIF 4 portfolio is Macquaries 100% ownership of Renvico, and Italian renewable energy company. Renvico operates in the field of renewable energy, specializing in wind farm management. It has a strong presence in Italy and France, with around 334 MW of annual installed capacity.

Renvico believes in passing on a culture of sustainability to the younger generation by raising awareness about renewable sources and energy-saving. The company is committed to supplying broad and transparent information about renewable energy, its importance and the possibilities offered by developing it. For several years, Renvico has been financing the ENERGETICAMENTE project at the Fossato di Vico wind farm, which has involved creating and maintaining the Fossato di Vico Wind Power Study Centre. The aim of this centre is to teach schools about sustainability and generating power from renewable sources.

Phillips, Hager and North

Grand Renewable Solar (Internal Rating: BBB-)

The Grand Renewable Solar (GRS) project is the second largest operating solar facility in Canada with 100 megawatts of capacity. It is located on 1,000 acres of long-term leased land in Haldimand County, Ontario. The project reached commercial operations in March 2015. GRS issued over $600 million in senior secured bonds that mature in 2035. The issuer has proven solar technology with useful lives that extend beyond the maturity of the bonds.

The power generated by GRS is 100% contracted under a Power Purchase Agreement with Ontario’s Independent Electricity System Operator (IESO). IESO is a not-for-profit entity created by the Electricity Act, 1998 (Ontario) to oversee the Ontario electricity market. It is rated A(high) and Aa2 by DBRS and Moody’s, respectively.

Decision:

We like the project’s robust fundamentals, resilient debt service coverage metrics, and strong support from the Ontario government. We also view the positive ESG feature of GRS as a renewable energy supplier as a credit enhancement. High creditworthiness of IESO as the payment counterparty is an important risk mitigant.

This combination of factors led us to invest in the GRS bond issue.

Foyston, Gordon and Payne

As part of our rigorous equity research, we actively engage companies on ESG issues on a regular basis and raise our concerns whenever necessary. We use our internal resources as our analysts are able to engage more thoroughly with company management than external providers.

We met with Finning to provide our feedback on the company’s first sustainability report and provide our suggestions on taking its ESG framework forward. FGP was a key shareholder voice in suggesting Finning put out a sustainability report and we were the first firm to provide Finning with ESG feedback. FGP was very happy to see that Finning has already stated their first tangible goal: reducing accidents by 40% within the next five years. Top of mind was the May 15 fatality of a Finning employee at a client’s mine in Chile. Finning told us that the incident is still under investigation.

At this meeting, we also discussed Finning’s indigenous hiring policies. While Finning does not have a specific policy regarding indigenous hiring, the company has a general policy that encourages inclusivity in their hiring practices.

Bentall Green Oak

Bentall Green Oak manages Environmental, Social and Governance risk to generate long term-value for our clients. They have achieved an A+ rating from United Nations Principles for Responsible Investment (UN PRI) and received the 2018 GLOBE Climate Leadership Award in the Large Business Innovator Category. This year, in the 2019 Global Real Estate Sustainability Benchmark (GRESB) the Fund posted its best GRESB performance ever, achieving 2nd place in the Canadian Diversified peer group, and 8th overall globally. The Fund also made its first-time submissions to GRESB’s Resilience Module, and ranked 2nd in the Global Diversified category. The Resilience Module evaluated BGO’s portfolios and the company’s strategic approach to climate resilience compared to its global peers.

 

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