Extending our responsible engagement efforts globally

As a manager of other investment managers, UTAM typically doesn’t engage directly with company boards and management. But as an active owner on behalf of the University of Toronto, we work with Canadian and global investors in addressing issuers’ environmental, social and governance (ESG) risks. And now, as part of our Responsible Investment Policy, we’ve added an engagement overlay service to support our investment decision-making and represent our ESG concerns to issuers worldwide.

Given our size and the fact that we invest through third-party investment managers, UTAM undertakes engagement activities through formal and informal collaborations with other Canadian investors, as well as through international alliances. By joining with like-minded investors who have substantial combined holdings, we can significantly magnify the impact we could have by acting alone.

Now we’ve augmented our efforts – particularly abroad – with reo®, the responsible engagement overlay service provided by BMO Global Asset Management Inc. The service identifies ESG risks in select companies within its clients’ equity portfolios, then initiates dialogue with corporate leaders to help ensure those risks are effectively managed to optimize long-term performance.

The reo® service comprises:

  1. Priority engagements – in-depth, frequent interactions with companies that have significant ESG risks.
  2. Thematic engagements – aimed at improving ESG practices in specific areas across groups of companies. Examples of recent themes include executive remuneration, U.S. pharmaceutical pricing and the impacts of water, food and energy shortages.
  3. Reactive engagements – responding to current controversies or breaches of the UN Global Compact on human rights, labour, environmental protection and anti-corruption.

The reo® service complements our existing engagement activities: Since 2008, we’ve worked with other institutional investors in the Canadian Coalition for Good Governance, which promotes good governance to the boards and management of Canadian issuers. UTAM is also an active participant in Climate Action 100+, an initiative to engage with more than 100 of the world’s largest greenhouse gas emitters.

“As a manager of managers, we take a multi-pronged approach to engagement,” says Daren Smith, UTAM’s President and Chief Investment Officer. “For a firm our size, a service like reo® allows us to leverage the influence of a larger asset base than would be possible if we pursued engagements on our own. It’s a valuable tool, extending the global reach of a responsible investing approach that we continually benchmark against the most forward-thinking institutional investors.”