Trends in Engagement

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Trends in Engagement May 28, 2007 Robert
Walker Vice President, Sustainability
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Agenda

• Shareholder Action Program Overview
• Trends
• Media coverage
• Calls for Transparency
• Emerging backlash?
• Discussion

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The Ethical Funds Company
Launched in 1992 Fifteen retail mutual funds
in our family 2.4 billion in assets
Headquartered in Vancouver
Serving the institutional market via Guardian
Ethical Management
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Sustainable Investing Program
ESG Evaluations
Risk-based model - identifies companies capable
of integrating environmental, social, and
governance factors into strategy and operations
Shareholder Action Program
Use the tools of shareholder action to improve
ESG performance manage portfolio risk
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Why shareholder action?

• Express unitholder values
• Engagement helps control risk
• Better portfolio performance
• Cant change a company not own

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Combining Evaluations Engagement
Assess
Invest
Engage
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Focus List
Emerging ESG issues
Portfolio exposure
Company performance
Economic materiality
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Collaboration

• Interfaith Centre for Corporate Responsibility
• Ceres Investor Network on Climate Risk
• Comité syndical national de retraite Bâtirente
• Regroupement pour la responsabilité socialedes
  enterprises
• Shareholder Association for Research and Education

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The Decision Tree
Identify Candidates and Establish Goals
Identify Stakeholder Coalition
Communicate Concerns to Company and Offer Dialogue
Company Acknowledges Concerns and Agrees to
Dialogue
Company Fails to Acknowledge Concerns
Company Agrees to Dialogue
File Shareholder Proposal
Meet with Company
Company Opposes Proposal in Proxy Circular
Establish Course of Action
Solicit Support and Move Proposal at AGM
Follow-up and Monitor Company Progress
Assess Results and Establish Next Steps
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Summary Results - 2006

• Broadcast campaign
• Identify and address issues common across all
  companies on TSX
• 2006 encouraging executive compensation linked
  to sustainability
• 43 intensive dialogues
• One-on-one discussions with management
• Focus on Canadian companies
• 13 resolutions filed
• Reached agreement with more than 50
• Increasingly high levels of support

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Trends
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Media

• Increased media coverage
• Reporters covering engagement like a sporting
  event
• Some expressing concern damaging company
  reputation
• Focus is on the shareholder proposal, the AGM,
  and conflict

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Calls for Transparency

• Proxy voting disclosure requirement for mutual
  funds
• United Nations Principles for Responsible
  Investment
• Increased academic attention focussing on the
  proposal not the dialogue

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Backlash in Alberta

• Canadian Natural Resources
• Refusal to circulate two proposals
• Alberta Business Corporations Act
• Requires at least two shareholders with 5 of
  outstanding stock to file

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Backlash in the USA

• SEC hearings on proxy access
• SEC considering replacing the right to file
  non-binding shareholder proposals with electronic
  chat rooms
• Federal provision for filing shareholder
  proposals in USA contained in regulation, not in
  legislation
• Potential for policy contagion?
• Potential for public discourse contagion?

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Questions?