IMCO’s Investment Governing Policies are intended to provide for principled, consistent application of investment management practices for our clients and to promote transparency in our investment approach.
The Responsible Investing Policy (“Policy”) documents key commitments and guidelines for IMCO’s approach to the incorporation of environmental, social and governance (ESG) considerations within the investment process.
This Responsible Investing Policy outlines how we approach ESG issues for the investment strategies and portfolios managed by IMCO.
IMCO’s Responsible Investing Policy supports IMCO’s mission to provide clients with strategic portfolio construction advice, investment opportunities and products, risk management and client services. This approach is also aligned with IMCO’s core values of integrity, public purpose, respect, innovation and continuous improvement and collaboration.
As such, IMCO is a signatory and is committed to the United Nations-backed Principles for Responsible Investment (PRI). The six Principles are:
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the Principles.
- We will each report on our activities and progress towards implementing the Principles.
IMCO’s focus is on delivering the risk-adjusted investment returns that can help clients meet their long-term financial objectives. We consider ESG issues as a part of our management of risk and investment opportunities in a manner that is consistent with our fiduciary duty obligations to our Clients.
The following are IMCO’s Investment beliefs on ESG which underpin this policy:
- ESG issues impact investment returns and risk, and therefore should be integrated within our investment process.
- Climate change presents both a systemic investment risk and opportunity, and we should consider the potential impacts of the transition to a low-carbon economy and the physical impacts of different climate outcomes.
- Governance matters and will continue to be central to our investment decision-making and the assessment of companies into which we invest.
- Diversity and inclusion contribute to long-term sustainable performance and we will integrate diversity and inclusion into our investment process, where possible, and take steps to encourage better practices.
- The four pillars of IMCO’s ESG strategy – Integration, Stewardship, Sustainable Investing and Screening – are designed to improve risk-adjusted investment outcomes for our clients.
ESG Considerations within the Responsible Investing Framework
IMCO defines Responsible Investing as an approach that incorporates ESG considerations into the investment process, to better manage risk and generate sustainable, long-term returns.
IMCO recognizes that there is a broad set of ESG issues that are increasingly material and important (please see table below for examples).
Issues relating to the quality and functioning of the natural environment and natural systems.
- Climate Change
- Waste and pollution
Issues relating to the rights, well-being and interests of people and communities.
- Diversity and inclusion
- Health and safety
- Human rights
- Labor standards
- Supply chain management
Issues relating to the governance of companies and other investee entities.
- Board structure, diversity, and independence
- Business ethics
- Executive compensation
- Accounting and audit quality
- Risk management
IMCO has decided to implement a focused approach to ESG issues and has therefore identified climate change, diversity and inclusion, and governance matters as priority areas to focus on in our investment process.
ESG issues can impact investment returns and risk and therefore are integrated into our investment considerations. The degree of relevance, or materiality varies, as does the current state of integration across asset classes. ESG practices and performance are considered in the evaluation, selection and ongoing monitoring of external investment managers. IMCO will continuously review, evolve, and improve our ESG practices.
IMCO will take steps to identify and manage climate change risks and opportunities with the aim of managing risk and enhancing long-term risk-adjusted returns. This includes improving processes around governance and strategy to manage climate-related risks and opportunities in line with the Task Force on Climate-Related Financial Disclosures (TCFD)i recommendations.
Good governance enhances corporate performance and IMCO will consistently assess governance considerations across the investment value chain and encourage best practices.
Diversity and inclusion (D&I) can contribute to better idea generation and outcomes. We will ensure our investment decisions include D&I considerations and encourage best D&I practices among our managers and investee companies.
IMCO believes that stewardship helps us better manage risk and contributes to long-term investment performance. We will monitor and engage on material ESG issues with entities in which we invest.
Proxy voting is an important component of our stewardship and we take ESG considerations into account in our proxy voting activities. IMCO votes proxies to enhance long-term sustainable value creation.
We will engage collaboratively with other institutional investors and through investor organizations when appropriate, including promoting ESG standards and best practices as well as providing input to regulators.
If necessary, we will consider escalation of our engagement activities, which may include seeking governance improvements, collaborative engagement, or proxy voting. Divestment is also an option to be considered where there is a sustained risk to continuing the investment following ongoing unsuccessful engagement.
IMCO believes that navigating longer-term sustainable trends and investing in companies delivering solutions to environmental and social challenges is likely to lead to improved risk management and new investment opportunities. As such, IMCO will research and consider sustainable investing opportunities that benefit from powerful trends and have a positive impact on society. Additionally, IMCO recognizes potential investment opportunities available in a transition to a low-carbon economy and supports the UN Sustainable Development Goalsii and will therefore give consideration to them, where applicable, in our investment process.
IMCO recognizes the importance of considering ESG related risks in the investment management process, including the requirement to screen companies for misalignment with IMCO’s and our clients’ core missions, values and risk and return criteria. We will implement a robust screening framework that strives for research- based, repeatable, and defensible results.
Transparency and Reporting
Consistent with IMCO’s expectation of disclosure on ESG practices and performance from the entities in which we invest, we are committed to reporting on our responsible investing activities to our clients and providing information publicly on our approach.
The IMCO management owner of this Policy for purposes of ensuring that it gets issued, reviewed and updated on a regular basis will be the President & CEO (or such other individual as may be designated from time to time by the CEO) and his/her designate (the “Document Owner”). The Document Owner is also responsible for ensuring relevant IMCO senior executive team members (the “Applicable SET”) have been given a reasonable opportunity to review and comment on this Policy prior to it being approved for use by Management Investment Committee (MIC).
Any reviews of this Policy should, at a minimum, be performed by the Document Owner at least one year from the effective date of this Policy. Subsequent reviews should, at a minimum, be performed at least once every three years by the Document Owner and MIC.
Non-Material and Material Revisions
Any non-material revisions to this Policy (either resulting from the Document Owner’s reviews or otherwise) can be approved by the Document Owner at any time following a review of the changes by General Counsel (GC) or his or her designate. Such non-material revisions may include edits to:
- cure any ambiguity, clerical or typographical errors;
- clarify, correct or supplement any provisions which might be defective; or
- satisfy any legal or regulatory requirement applicable to IMCO.
Any request for a material exception to this Policy must be approved by MIC.
Any request for a non-material exception to this Policy must be approved in writing by the Chief Investment Officer, Chief Risk Officer and GC.