What’s Your Strategy?
The Caisse, the investment manager for 25 depositors (16 of which are pension funds), was certainly aware of ESG issues. “Those issues were known to us because we’ve addressed them through proxy voting since 1994,” says Marie-Claude Provost, senior advisor, proxy and policy management, with the Caisse. In proxy voting, shareholders can also bring forward issues—such as more disclosure or environmental considerations—that they want shareholders to vote on, she says. The Caisse, which manages approximately $257 billion in total assets, also focuses on what it calls engagement with the companies it invests in. “Engagement is mostly the dialogue we have with the companies, but it’s working with [them] to make those issues better and to improve their social responsibility,” she says.
BCIMC, with more than $85 billion in assets under administration, is also contributing to the ESG landscape. “We like to say we’ve always been a responsible investor,” says Susan Enefer, BCIMC’s manager, shareholder engagement. “We’ve always been a prudent long-term investor, always with an eye to managing risk and maximizing returns.” The investment manager for about 50 different plans in B.C. began looking closely at SRI about three years ago.
According to Enefer, there were three drivers pushing the issue. First was clients. “It is extremely important to them that if we can deliver both return and corporate citizenship, that is the message they would like us to operate by.” Second was proactivity. Given the issue of climate change, for example, BCIMC began to explore the ESG space, investigating alternative, sustainable infrastructure. It also looked at governance failures—Enron and Parmalat, for example—that made headlines. Third was awareness of the marketplace. According to the 2007 Report on Socially Responsible Investing Trends in the United States, approximately 11% of assets under management in the U.S. ($1 out of every $9) are now involved in SRI. “That’s a huge growth phenomenon,” says Enefer. “We needed to pay attention to that.”
BCIMC’s SRI strategies are applied across its public equity, private equity (including infrastructure) and real estate portfolios. “We’re just dabbling our feet into our credit risk program in our fixed income portfolio,” says Enefer. BCIMC uses a focused-asset approach for its private equity portfolio. “We have dedicated or committed dollars to climate themes such as clean technology, clean energy [and] waste management.” The public equity portfolio has a negatively screened U.S. equity portfolio, filtered to avoid certain industries or types of companies, such as tobacco. But the concept of negative screens is challenging for investment managers. “We just want to wrap our arms around the entire investment universe if we can because of diversification concerns,” she says. “We’re watching that carefully, but we’re trying it.”
Up For a Challenge or Two
Idealism looks great in writing, but it’s a little more challenging to implement. “We originally thought we were going for some sort of balanced portfolio,” says Koza. “But when we looked at the bond issues [from an SRI perspective], there really wasn’t a lot of reason we needed to screen those out. We had looked at providing just a dividend income fund, but it narrowed the universe to stocks that would provide dividends on a regular basis, and it wasn’t diverse enough.” Finally, Western implemented the Socially Responsible Global Equity Fund, with both positive screens (favouring companies that employ environmentally sensitive practices in forestry, for instance) and negative screens (weeding out those that engage in questionable practices or that derive revenue from ventures such as fur and gambling).
