Published on: October 26, 2023
Company engagement and proxy voting are some of the tools we use to understand the challenges and opportunities of the companies whose securities we own on behalf of clients. While active engagement helps ensure that a company’s governance oversight and strategy are aligned with shareholders, proxy voting provides a strong signal to boards and management on what is material to investors.
Voting rights have continuously evolved to reflect the principles of governance, emphasizing the importance of shareholder democracy and investor protection. We believe that exercising the right to vote stands as a pivotal responsibility, serving as a potent tool to drive impactful change within companies, promote stronger governance, and signal our level of trust in management.
These rights and responsibilities are more relevant than ever in the face of significant environmental, governance and social (ESG) issues. To shed light on our approach, we put together key points of our Proxy Voting Policy while also addressing company engagement defined by our Stewardship Policy, which work together to drive value from our relationship with companies.
What is the Main Purpose of Addenda’s Proxy Voting Policy?
The main purpose of our Proxy Voting Policy is to openly communicate with companies, clients, and stakeholders about the sustainable practices we support. We strive to be transparent about our voting positions and priorities, which include critical issues like climate change, promoting diversity, and managing human rights concerns. We have set up a dashboard on our website. Our policy serves as a communication tool, and we make sure to update it regularly to stay in tune with the best practices in environmental, social, and governance (ESG) issues.
We participate in the process by voting on behalf of our clients, adhering to the guidelines outlined in our Proxy Voting Policy. If required, we may even attend a meeting to vote in person. The Sustainable Investment team assesses all of the proxy votes for companies and makes recommendations, which are discussed and validated by the appropriate portfolio manager. This ensures that the best interests of our clients are represented.
What Factors Does Addenda Consider When Assessing Ballot Items? How do you Determine the Best Course of Action?
We take a thoughtful approach. We collaborate with Institutional Shareholder Services (ISS) to evaluate each item individually and determine how to vote in a manner that aligns with our Proxy Voting Policy guidelines. Our primary focus is always on promoting the long-term performance and sustainable success of companies for shareholders and other stakeholders. We thoroughly consider the unique aspects of each ballot item and make decisions that we believe will best serve our clients’ interests.
Since Proxy Voting and Company Engagement are Closely Related, can you Provide an Overview of Addenda’s Stewardship Policy and its Main Objectives?
The Policy outlines our commitment to practising stewardship on behalf of our clients in order to protect and enhance the long-term value of their investments. It defines stewardship as monitoring the practices of investee entities, exercising voting rights, and engaging in meaningful dialogue with companies and policymakers. We are in the process of revising the policy.
The policy is guided by nine key principles that emphasize the importance of ESG practices, continuous improvement, and public disclosure of our stewardship activities. For instance, we believe that good ESG policies, practices and performance have a positive influence on long-term investment performance, and that practising active stewardship will help us fulfill our duty to act in the best long-term interests of our clients.
How Does Addenda Monitor the Companies it Invests in as Part of its Stewardship Approach?
We monitor the companies to identify potential issues that could impact their long-term performance and sustainability. Our monitoring activities include reviewing public disclosures, conducting research and analysis, obtaining third-party insights, and attending or monitoring shareholder meetings and calls. We assess aspects such as a company’s strategy, performance, governance, compensation, disclosure, and approach to social and environmental risks and opportunities.
Can you Elaborate on Addenda’s Engagement Process With Investee Companies?
Our engagement process involves purposeful dialogue with investee companies to support the protection and enhancement of the long-term value of investments for our clients. We select companies for engagement based on various factors, including the relevance of ESG matters to the company and our clients, as well as our ability to influence the company.
More specifically, engagement activities can range from interacting with company management and non-executive directors, to submitting letters, to participating in shareholder resolutions, to even exiting the investment as a last resort. We may also collaborate with other investors and stakeholders in our engagement efforts.
How Does Addenda’s Stewardship Policy Align With International Frameworks and Principles?
Our approach to stewardship is consistent with the framework provided by the United Nations-sponsored Principles for Responsible Investment (PRI), the International Corporate Governance Network’s Global Stewardship Principles, and the Canadian Coalition for Good Governance’s Stewardship Principles. We commit to these frameworks and principles where it is consistent with our fiduciary responsibilities, which include monitoring companies, engaging with them, voting at company meetings, engaging with regulators and policymakers, and taking an integrated approach to stewardship across our organization.