Sustainable Investing: Q4 2014 Highlights

There are barriers in current market practices, structures and regulation that undermine the interests of investors and the systems within which they operate. These barriers must be removed and reshaped over time in order to enable the development of a fi nancial system that supports sustainable development. Overcoming these barriers will allow investors to allocate capital effi ciently and in the most productive manner. 

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Addenda Capital is committed to playing an active role in promoting sustainable fi nancial markets. We see promoting sustainable fi nancial markets as a way to address systemic concerns that might aff ect all companies in a sector, all companies in a market or a group of investors. We are focused on trying to improve the practices, structures and regulation that might hinder the performance of the entities we invest in because our approach to sustainable investing is intended to enhance the long-term investment returns of our clients. We are guided by the evidence that shows that good environmental, social and governance (ESG) policies, practices and performance have a positive infl uence on long-term fi nancial and investment performance.

We promote sustainable fi nancial markets in two primary ways:

1. Supporting and participating in collaborative initiatives
2. Participating in the development of policy, regulation and standard setting

Supporting and Participating in Collaborative Initiatives One of the cornerstones of Addenda Capital’s approach to promoting sustainable fi nancial markets is the belief that the eff ectiveness of our activities can be enhanced by collaborating with other likeminded investors and stakeholders. In light of this belief, Addenda Capital has become increasingly involved in a number of collaborative investor initiatives. Table 1 (below) demonstrates how we have been increasing our involvement in formal collaborative initiatives.

Table 1
Addenda Capital’s Participation in Collaborative Initiatives

Collaboration allows us to leverage our internal resources, lend our credibility and gravitas to the good work of others, share tools and pool resources. Our commitment to these collaborations also underscores our commitment to sustainable investing.

Below, we have provided a brief overview of some of the key collaborative initiatives we are involved in and how we think our involvement benefi ts our investment processes and our clients.

Participating in the Development of Policy, Regulation and Standard Setting

When it makes sense we try to directly contribute to the development of policies, regulations and standards that will enable the development of a fi nancial system that supports sustainable development. Our contributions are intended to help raise standards which in turn should help the companies we invest in maximize their fi nancial performance over the long term. In some instances, we develop our own response and feedback in house and in other instances, we lend our credibility and gravitas to the good work of others.

Below, we have provided a few examples some of our submissions to regulators and some examples of our collaborative actions with other investors.

Submissions to Regulators

Guidance for Proxy Advisory

Firms We submitted comments to the Canadian Securities Administrators (CSA) on proposed National Policy 25-201 Guidance for proxy advisory fi rms. We welcomed the CSA’s focus on proxy voting and were pleased that the nature of the proposed policy was guidance that is “not intended to be prescriptive or exhaustive.”

Gender diversity on Boards and in Executive Officer Positions

We submitted comments to the Ontario Securities Commission regarding proposed disclosure requirements regarding the representation of women on boards and in executive offi cer positions. We expressed our interest in seeing increases in many types of diversity among corporate directors and executive offi cers. We view gender diversity positively as well as diversity in professional experience, education and ethnicity that can enhance board eff ectiveness and corporate decisionmaking.

Security Holder Rights Plans

We submitted comments to the CSA on proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans. We were supportive of the CSA’s eff orts to help ensure the equal and fair treatment of all shareholders in the event of a takeover bid and allow a company enough time to consider alternatives to a bid.

Early Warning Reporting Regime

We submitted comments to the CSA on proposed amendments and changes to the early warning reporting regime in Canada. We were supportive of the CSA’s eff orts to provide greater market transparency and investor confidence.

Collaborative actions with other investors

2014 Global Investor Statement on Climate Change

Addenda Capital, along with nearly 350 other investors with more than US$24 trillion signed this statement that was released at the UN Secretary-General’s Climate Summit on September 23, 2014. The purpose of the statement is to urge stronger national and international policy action on climate change and clean energy, and it outlines steps investors are taking and intend to take to scale up low-carbon investment, given the right policy signals.

Letter to International Organization of Securities Commissions to Encourage Better ESG Disclosure

We, along with many other investors signed a letter that was presented to the International Organization of Securities Commissions (IOSCO) earlier in 2014. The letter aims to highlight investors’ need for consistent and material disclosure of corporate sustainability information to inform their investment decisions.

Investor Statement Regarding Green Bonds and Climate Bonds

We signed this statement focused on the green bonds and climate bonds market because it makes suggestions for action needed by stakeholders to support further growth of and investor interest in this market. The statement was also released at the UN Secretary-General’s Climate Summit on September 23, 2014 and it will also be presented at the Lima Climate Change Conference in December which is part of the United Nations Framework Convention on Climate Change negotiations.

Investor Call to Action: Anti-Corruption and the Global Development Agenda

We signed an appeal from the private sector to governments calling for a commitment to strengthen anti-corruption measures and provide greater transparency, and aiming to integrate anti-corruption and good governance into the post-2015 UN development agenda.

Conclusion

By participating in collaborative initiatives and contributing to the development of regulation we hope to promote sustainable fi nancial markets that will enable our clients to achieve superior long-term investment performance. We continue to look for opportunities to enhance the system in which we operate and we are always open to hearing from clients about issues that concern them.

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