Our active ownership involves working closely with our portfolio companies where we believe it will create better long-term outcomes on sustainability-related matters (like climate change) and, as a result, generate more value for the Fund. We engage with our portfolio companies through our board representation and shareholder voting rights.
We recognize and respect the roles, responsibilities and rights of shareholders, board directors and management teams. We believe each group plays a part in achieving long-term value creation. Success here hinges on clear communication and everyone understanding their respective roles and responsibilities.
That said, we do expect boards and executives to integrate climate risks and opportunities into their strategy and operations, with a view towards long-term value creation for the company.
Roles and responsibilities
Roles and responsibilities of shareholders, boards and management teams of companies.
The shareholders, boards and management teams of companies each play critical roles in creating sustained long-term value. Their relationships hinge on clear communication and understanding of their respective roles, responsibilities and rights. We view their responsibilities as follows:
Being aware of, and understanding, the views of relevant stakeholders can help boards and management be more effective in discharging their duties.
What We Expect of Companies
As an active owner, we are clear about our expectations of the companies we invest in.
To deliver the best outcomes for the company, we believe that a board should be majority independent.1 While a majority-independent board helps ensure effective board oversight in most circumstances, we recognize that equity-controlled companies may warrant a different independence standard. In our view, it is reasonable for a controlling shareholder to have representation on the board of directors proportionate to its equity interest.
Boards should have sufficient diversity to be able to challenge, counsel and support management in developing and executing a strategy that incorporates a thorough review of all material business risks and opportunities. Diversity should be considered in all its forms, including but not limited to gender, ethnicity, race, age, sexual orientation and disability. We strongly encourage boards to disclose the diverse attributes of their directors where appropriate, and where directors have granted permission to do so, to allow shareholders to fully and accurately evaluate board diversity.
1. A director is typically considered independent if they have no direct or indirect material relationship with the company, or the company’s senior management or controlling shareholder(s). We defer to a company’s classification of individual director independence, which we expect reflects local listing rules and other applicable laws and regulations.
We look for companies to report on the potential impact of those factors, including climate change, that are relevant to their industries and investment decision-making. For private companies, this pertains to reporting to their shareholders and boards of directors. We support alignment of reporting to the International Sustainability Standards Board (ISSB) IFRS S1, using SASB Standards to implement industry-specific requirements. Wherever climate change-related factors are material to the company, we expect portfolio companies to have a credible transition plan to navigate through the challenges and opportunities presented by climate change. We expect companies to disclose an appropriate governance structure for monitoring climate risks and opportunities. We support companies aligning their climate change reporting with the ISSB IFRS S2 climate-related disclosure standards, which are based on the Task Force on Climate-related Financial Disclosures (TCFD).2
2. On July 6, 2023, the Financial Stability Board (FSB) announced that it will wind down the TCFD following the delivery of the TCFD’s annual status report in September 2023. The launch of the ISSB sustainability disclosure standards which are based on the recommendations of the FSB’s TCFD can be considered the culmination of the work of the TCFD.
We expect companies that are proactively integrating ESG factors into their businesses to be able to tell us how they do so and how it affects outcomes. Solely relying on ESG ratings may not capture the nuance of integration, which is why communication between the board, shareholders and management, is important.
Culture is often the differentiator between good and great companies. We expect companies to share with us how their culture helps drive sustainable value creation.
Executives should receive market competitive total compensation that is tied to individual and company performance and that incentivizes them to focus on the long-term interests of the company. This includes considering sustainability-related factors where appropriate and under their control.
Additionally, we expect our public portfolio companies to:
As an owner in public companies, we have the right to vote on proposals brought before shareholders at annual and special meetings. Voting proxies is not only our fiduciary responsibility as a shareholder; it is also a crucial way to convey our views to Boards of Directors and management. We are willing to support companies if they provide compelling explanations for why specific proposals diverge from these principles and guidelines.
One of the most effective ways we can share our views with the public companies we invest in is voting our proxies. We post our individual proxy vote decisions on our website.
Policy on Sustainable Investing
How we approach sustainable investing within the context of our mandate.Learn more
Our individual proxy vote decisions in advance of shareholder meetings.Learn More
Reporting in accordance with the Task Force on Climate-related Financials Disclosures (TFCD).Learn More