Value Creation
We use our influence and governance rights to drive sustainable progress and long-term value creation at our portfolio companies.
Being a responsible steward of assets goes beyond providing capital. We believe in sharing our expertise to support our portfolio companies and promoting strong sustainability practices through direct engagement and proxy voting. We amplify our reach and voice through select partnerships, coalitions and policy engagement.
Engagement
Our engagement activities aim to encourage robust governance practices, promote transparency and support companies to build their internal ESG expertise. We focus on real-world outcomes that can increase the value of our investment and benefit society, such as greenhouse gas emissions, board governance, and health and safety.
Engagement takes time to yield results and we believe it is most successful when we establish a constructive relationship.
IMCO's Stewardship Guideline describes our approach for engaging with entities in which we invest on material governance and sustainability issues.
"We are not just investors, we are stewards of high-quality assets. We support our portfolio companies to develop their sustainability goals and create value across the portfolio using sustainability as a source of competitive advantage."
- John Di Re, Managing Director, Fundamental Equities
Case Studies
Ownership Works
In 2023, IMCO became the first Canadian institutional asset manager to join Ownership Works as a founding investor partner. Ownership Works is a non-profit organization working to implement broad-based employee ownership programs.
Rising inequality is a key theme in our World View. Through our research and networks, we recognize that broad-based employee ownership can create significant opportunities for employees to build wealth and improve business performance.
Through this partnership, IMCO collaborated with an infrastructure portfolio company on an employee ownership program, and several of our external partners have committed to the model.
euNetworks
IMCO has been an investor in euNetworks, a leading European bandwidth infrastructure company, since 2018. The company owns and operates fibre networks in 17 cities. We identified sustainability as a priority value lever and engaged with the management team and co-shareholders to elevate the ESG agenda at the company. In 2022, euNetworks joined the Climate Pledge, committing to being net zero by 2040 and setting science-based emission reduction targets across scopes 1, 2 and 3. In 2023, the company developed its inaugural sustainability policy. It also secured a €760 million sustainability-linked loan, through which meeting specific sustainability targets will lower the interest rate.
WPT Industrial REIT
As part of our regular dialogue with WPT Capital Advisors, a key U.S. partner, we shared our sustainability goals and need for more granular data collection and tenant engagement. Building owners in the industrial sector have historically faced barriers in collecting and tracking tenant utility data, since utility costs are the tenant’s responsibility. WPT invested in a service to obtain real-time electric, gas and water consumption data used to identify capital expenditure projects. This model provided insights into whole building performance. In addition, greater awareness of individual assets’ energy and water consumption allows building owners to establish benchmarks, develop strategies to reduce energy and emissions, optimize costs and increase the durability and resilience of our sites.
Proxy Voting
Proxy voting is an important tool for shareholders of public companies to exercise their rights, hold management accountable and express their views.
At IMCO, we vote according to our Proxy Voting Guideline to promote sound governance and sustainability practices. We aim to vote at the shareholder meetings of every public company in our portfolio. We also evaluate management resolutions and shareholder proposals on a case-by-case basis, recognizing jurisdictional differences.
We are transparent about our proxy voting activity. We make our voting intentions public ahead of annual meetings and maintain a public database of our voting activities.
Our Proxy Voting Record
Our searchable database provides an account of our voting, rationale for when we vote against management and all shareholder proposals.2024 Highlights
2024 Proxy Voting Trends, Issues & IMCO Votes
In 2024, shareholder proposal volumes continued to rise. However, the surge of prescriptive shareholder proposals, which demand specific actions and targets, has resulted in more U.S. listed companies requesting the Securities and Exchange Commission not recommend enforcement action if the company excludes a shareholder proposal from its proxy statement, leading to more omissions and lower support overall.
Environmental and social topics remained the most prevalent, with governance-related proposals seeing the sharpest increase. Within those proposals, key areas of focus included climate change and director elections, specifically board independence, director competency and gender diversity. Cybersecurity, especially the responsible use of artificial intelligence, also emerged as an area of focus for investors.
Amongst management proposals, say-on-pay remained a consistent and important item on the ballot, allowing shareholders to express their opinion on the company's approach to executive compensation. Notably, support for these proposals ticked up in 2024 for companies listed on the Russell 3000, reflecting better compensation program disclosures and greater alignment between executive pay and companies' long-term financial returns.
Overall, IMCO:
- Supported 51% of shareholder proposals, most of which were related to improving climate disclosures, as well as reporting on social issues such as gender/racial pay gaps, effectiveness of diversity, equity and inclusion efforts, human rights and political spending.
- Voted against management in 19% of cases, most of which were related to director elections, compensation and auditor ratification.
IMCO's perspectives and our voting activity on specific top issues are outlined below.
Climate Change
Shareholders filed and voted on more environmental proposals in 2024, but average support fell from 20% to 18%1. Asset managers, particularly those that operate in the U.S., are facing growing scrutiny from regulators, policymakers and upstream clients, who demand that voting practices be rooted in rigorous financial analysis without influence from ideological pressures. As a result, shareholders are increasingly selective about backing what they perceive to be prescriptive resolutions.
IMCO's voting practices will remain focused on supporting climate-related proposals that align with value creation. Specifically, we support shareholder proposals that enhance transparency and accountability through climate-related disclosures aligned with ISSB's IFRS S1 and S2 standards. We also encourage high-emitting companies to adopt science-based targets and credible transition plans. IMCO may vote against or withhold from the Chair or relevant board members when companies fail to meet our climate expectations.
In 2024, we voted on 115 climate-related proposals and supported 63%.
SPOTLIGHT
Clean Energy Financing at American Banks
Shareholder proposals were filed at some of the largest American banks asking for disclosure of their Energy Supply Banking Ratio (ESBR) and encouraging additional reporting on relevant low-carbon financing targets. The ESBR was established in 2022 by Bloomberg New Energy Finance using seven common Paris-aligned climate scenarios to compare the low-carbon investment required to achieve these scenarios with the potential investment in fossil fuels.
IMCO was pleased to see many banks agreeing to provide this additional transparency and voted for the remaining ESBR-related proposals at Bank of America, Goldman Sachs and Morgan Stanley.
1 ESGUAGE/ The Conference Board, 2024 (2023/2024: January through June)
Say-on-Pay
Establishing a sound executive compensation program that both attracts and retains executive talent and delivers outcomes aligned with long-term shareholder interests is one of the critical responsibilities of the board.
Say-on-pay proposals provide shareholders with transparency on how executive pay is set, the link between pay and performance, and improving accountability to shareholders. Companies engaging in controversial pay practices are more likely to face challenges in justifying compensation packages to investors. Such practices include outsized compensation awards, one-time grants that lack a compelling rationale, disconnects between compensation and financial performance, or an unclear connection between program design and corporate strategy.
IMCO will generally support shareholder proposals requesting an annual advisory vote on executive compensation, and vote against management say-on-pay proposals if problematic pay practices are identified. In the absence of a say-on-pay vote on the ballot, IMCO may vote against or withhold from the members of the Compensation Committee.
In 2024, we voted on 859 say-on-pay proposals and supported 85%.
Director Elections
IMCO believes that the board of directors should act in the best interest of the corporation. Directors should consider the interests of shareholders as well as the interests of relevant stakeholders. To effectively perform these critical functions, a board should be independent and contain directors with diverse backgrounds, as well as relevant skills and experience.
In 2024, we voted on 10,620 director elections, voting against or withholding our vote 24% of the time. Some of the main reasons for our against/withheld votes related to governance are:
- Insufficient independence
- Lack of board gender diversity
- Lack of emissions reduction targets or lack of oversight on climate-related issues
SPOTLIGHT
Corporate Governance Engagement with HEICO Corporation
At HEICO, IMCO has taken a proactive, multi-pronged approach to improving board independence and gender diversity. In 2023, we voted to withhold support for three long-tenured directors due to concerns about their independence, and for the Chair of the Nominating Committee due to the absence of a lead independent director and lack of gender diversity on the board. These votes reflected growing concern among shareholders, with 39% and 28% of votes cast against two key directors.
In 2024, we followed up with a letter to management outlining our voting intentions and had a direct discussion on board succession planning and governance practices. These ongoing conversations underscore our commitment to long-term, constructive engagement on sustainability issues that matter to shareholders.
Responsible AI
Investors and businesses are increasingly aware that AI is changing the business landscape. As a result, they are reinforcing the need for robust governance practices and board oversight around AI use. About 13%2 of S&P 500 companies now have at least one director with AI expertise. Between 2023 and 2024, the number of proposals filed on AI policies among Russell 3000 companies increased from 1 to 133.
A majority of independent investors supported proposals calling for reporting on generative AI risks arising from misinformation and disinformation, as well as board oversight of AI usage at both Meta and Alphabet.
IMCO will generally vote for greater transparency on mis/disinformation and oversight related to generative AI to assess how the company is managing associated risks.
In 2024, we voted on 13 proposals and supported 62%.
2 ISS-Corporate: AI and Board of Directors Oversight. AI Governance Appears on Corporate Radar
3 Harvard Law School Forum on Corporate Governance: 2024 Proxy Season Review: Corporate Resilience in a Polarized Landscape
Collaborating with Industry Peers
Partnering with fellow investors to engage companies, policymakers and the broader financial industry on sustainability matters is a key component of stewardship. We recognize the value of collective action on behalf of our clients. It amplifies our voice and is an efficient use of our resources.
IMCO is part of several coalitions and initiatives seeking to advance sustainability goals.
Climate Engagement Canada (CEC)
Created in 2021, CEC is modelled on Climate Action 100+ with a goal of engaging Canadian high-emitting public companies on climate issues. There are 41 companies on its focus list.
IMCO was a founding participant and has engaged with companies like Enbridge Inc., Fortis Inc., and Waste Connections Inc.
Visit the CEC website30% Club
IMCO joined the 30% Club Canada Chapter in 2017. As a member, we call on and collaborate with companies to achieve and exceed the 30% gender diversity target, and to enhance the presence of other underrepresented groups on their boards and executive management teams.
