“FIDUCIARY DUTY IN THE 21st CENTURY, CANADA ROADMAP”
The report defines ESG integration as:
“the systemic and explicit inclusion of material ESG factors into investment analysis and investment decisions.”
It is now accepted that the fiduciary duties of pension trustees have evolved to the point that ESG integration in the investment decision making process is mandatory.
The report contains a number of recommendations to each sector of the Canadian investment community to advace ESG integration. Many of the recommendations hit at numerous challenges faced by institutional investors in integrating ESG such as:
- lack of ESG disclosure requirements by pension plans in governing legislation (except Ontario)
- lack of mandatory “say on pay’ voting in public companies by Canadian securities regulators
- a need for asset owners to better:
- disclose voting practices (and those of asset managers) and provide rationale
- engage with investee companies on ESG issues and publicise activities and value arising
- include an assessment of stewardship quality in their selection and monitoring of investment managers
- a need for the CSA to require corporate ESG disclosure in a standardized format
- a need for TSX and other exchanges to require standardized ESG disclosure
- a need for greater and expanded ESG investor education
I advise pension trustees and their advisors to review their plan’s Statement of Investment Policies and Procedures with a view to integrating ESG in a legally sound and meaningful way taking into account the many challenges to ESG integration that exist due to legal uncertainties, limitations regarding ESG competence in the investment industry, lack of access to investment products and emerging regulatory and reporting standards.
As a first step a review of the evolution of fiduciary duties with respect to ESG will serve trustees well in developing an effective and practical ESG integration strategy.
Please do not hesitate to contact me for further information.Contact Me