BCI Releases 2022 ESG Annual Report

Last week, BCI released its 2022 ESG Annual Report:

Victoria, British Columbia – Today, British Columbia Investment Management Corporation (BCI) released its 2022 ESG Annual Report. The publication provides key updates and insight into how we capture opportunities and manage risks associated with environmental, social, and governance (ESG) factors in the best financial interests of our clients.

“BCI’s ESG leadership builds on more than two decades of intentional action,” says Jennifer Coulson, senior managing director & global head, ESG. “We have established deep expertise and support for integration across asset classes, while using our size and influence to drive tangible ESG improvements. We continue to raise our expectations for portfolio companies, investment partners, and other players in the capital markets.”

The 2022 ESG Annual Report demonstrates progress under the four components of our corporate-wide ESG Strategy: Integrate, Influence, Invest, and Insight. During the year, BCI published our updated Climate Action Plan, which affirms our commitment to use our influence to drive actions aligned with the global goal of achieving net-zero emissions by 2050; expanded ESG expertise and support across asset classes; leveraged ESG and climate change as a source of value creation; and continued to address material ESG factors through direct and collaborative engagement.

“Preserving and growing long-term value for our clients remains the driving force behind our ESG commitments and decisions, particularly as the complexity of the investment landscape grows,” says Gordon J. Fyfe, chief executive officer and chief investment officer. “Active asset managers are playing a critical role in advancing ESG objectives within an increasingly nuanced and fast-changing environment.”

Our 2022 ESG Annual Reportis available on BCI.ca/ESG

Highlights from the report

Integrate
Completed 260 ESG reviews for investment opportunities and 38 ESG evaluations of external managers and partners across asset classes, leveraging proprietary and industry datasets and frameworks.
QuadReal Property Group (QuadReal), a BCI-owned company that manages our real estate equity and debt programs, ranked first in the Americas and fourth globally for its Canadian portfolio of office, industrial, retail, and residential assets in the Global Real Estate Sustainability Benchmark (GRESB) diversified category.

Influence
Voted at 3,478 public company meetings and increased expectations on climate change disclosure and performance, diversity, and protection of shareholder rights in the 11th edition of our Proxy Voting Guidelines.
Participated in public markets collaborative engagement initiatives targeting 2,294 companies on climate change, gender diversity, and sustainable finance.
Responded to or participated in 11 ESG-related policy consultations, roundtables, and joint statements, including feedback on the Securities and Exchange Commission’s proposed climate disclosure rule.
Escalated our engagement with companies on key issues through shareholder proposals filed on climate risk disclosure and freedom of association.
QuadReal committed to reach net-zero emissions by 2050 in alignment with BCI’s expectations for portfolio companies, building on its track record of emissions reduction initiatives.

Invest
Pursued climate-related opportunities, including acquiring Reden Solar as our first direct investment in solar energy in our infrastructure & renewable resources program.
Participated in 26 sustainable bond issuances valued at over $1.45 billion, increasing total historical participation to more than $4 billion; we expect this to grow to $5 billion by 2025.
Supported the expansion of the Sustainable Development Investments (SDI) Asset Owner Platform, including increasing the number of companies assessed using the UN Sustainable Development Goals and adding new datasets for investors.

Insight
Continued to build our ESG team and strengthen our corporate-wide approach, including appointing our first global head of ESG and adding dedicated ESG experts for private markets.
Initiated a climate opportunity sector scan to complement, enrich, and validate our in-house and third-party research.
Provided education and learning opportunities to BCI staff, clients, and board members on climate change, Indigenous reconciliation, human capital management, and other topics.

Aligned to the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, BCI is now integrating our climate-related disclosures into our Corporate Annual Report alongside our financial reporting. Our TCFD report will be published in our 2022-2023 Corporate Annual Report in July 2023.

ABOUT BCI
British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada with C$211.1 billion under management, as of March 31, 2022. Based in Victoria, British Columbia, with offices in Vancouver, New York City, and London, U.K., BCI is invested in: fixed income and private debt; public and private equity; infrastructure and renewable resources; as well as real estate equity and real estate debt through our independently operated platform company QuadReal Property Group. With our global outlook, we seek investment opportunities that convert savings into productive capital that will meet our clients’ risk and return requirements over time. This compels us to integrate long-term ESG matters into all investment decisions and activities. BCI’s clients include pension plans representing over 715,000 plan members, insurance funds providing more than three million Autoplan insurance policies annually, benefits coverage to more than two million workers and 225,000 companies, and special purpose funds within British Columbia’s public sector. Founded in 1999, BCI is a statutory corporation created by the Public Sector Pension Plans Act.

Right after BCI released its 2022 ESG Annual Report, it filed for a shareholder proposal for climate-related disclosure at Imperial Oil:

Victoria, British Columbia – British Columbia Investment Management Corporation (BCI) filed a shareholder proposal calling for Imperial Oil Limited (Imperial Oil) to increase disclosure on climate risk. This is the first climate-related shareholder proposal filed by a large Canadian public sector pension investment manager going to a vote at a Canadian company. BCI is the sole filer on the proposal, which will be presented at Imperial Oil’s annual general meeting on May 2, 2023.

“Disclosure of accounting assumptions related to climate change and the energy transition is a fast-emerging shareholder expectation,” says Jennifer Coulson, senior managing director & global head, ESG. “We require transparent accounting disclosure in financial statements to make informed investment decisions, including visibility over off-balance sheet liabilities, and Imperial Oil has not provided sufficient information.”

The proposal requests that Imperial Oil’s Board of Directors provide an audited report estimating the impacts of the International Energy Agency Net Zero by 2050 pathway on all asset retirement obligations by February 2024. Asset retirement obligations are the costs associated with the regulatory requirement to decommission assets at the end of their life. Companies account for certain future costs through financial statements, and we expect to have visibility of current off-balance sheet liabilities of assets with indefinite useful lives.

In addition to the shareholder proposal, BCI has voted against key directors at the upcoming meeting. These votes are based on our assessment that the company’s lack of risk oversight has led to major controversies related to tailings integrity and insufficient Indigenous engagement.

Taking action on climate change for more than 20 years, BCI has supported the Climate Action 100+ collaborative engagements with Imperial Oil and its majority shareholder Exxon Mobil Corporation (ExxonMobil) since 2017. BCI has co-filed a similar proposal at ExxonMobil. These actions reflect an escalation of our engagement efforts and align with the expectations and goals of Climate Action 100+.

More information is available on the Climate Action 100+ website.

Take the time to go over BCI's 2022 ESG Annual Report here.

Below, some highlights:

A message from BCI's Chair, Peter Milburn:

And a message from Gordon Fyfe, BCI's CEO:

Note this part:

We believe, as do our clients, that ESG matters make a difference and translate to meaningful distinctions in a company’s ability to generate long-term value for investors. As a result, we apply the same rigour and due diligence to evaluating ESG factors as we do traditional financial factors to maximize long-term performance. As an active asset manager, we use our influence, internal expertise, and governance rights to align interests with our stakeholders and pursue common ESG goals.

There's no doubt when done right (and I emphasize that), ESG matter makes a difference and translate to meaningful distinctions in a company’s ability to generate long-term value for investors.

But between you, me and the lamppost, most of Canada's large pension funds wish they didn't have to make such a big deal on ESG, preferring to focus exclusively on investments.

Their clients have been forcing them to focus on ESG and Canada's large pension funds are responding.

How do I know this? I know everything going on at these large pensions, there's a reason why I'm called Pension Pulse and it ain't because of my good looks.

Now, I would have loved to have gone over BCI's 2022 ESG Annual Report with Jennifer Coulson who was recently appointed their new Global Head of ESG as of March 1st.

Jennifer is one smart cookie and a huge asset at BCI.