ESG Questionnaire Response - Fiera Capital Corporation

ESG Policies

1. Please provide your ESG-related policies.

Fiera Capital’s Responsible Investment Policy and Proxy Voting Guidelines are included in Appendix to this document.

Fiera Capital’s Responsible Investment Policy outlines the firm’s approach to integrating ESG assessments into investment processes and highlights the many  benefits of increasing our knowledge of companies in which we invest, better controlling the risk of our portfolios and helping companies improve over the long term.

The policy also provides a blueprint for “active ownership,” which includes the tactical use of proxy voting rights and engagement with the management of companies in which the firm invests in order to address ESG issues and affect positive change.

The policy was approved by Fiera’s Board of directors in December 2017 and is subject to yearly review.

There have been no recent changes to the policy.

Furthermore, Fiera Capital’s Proxy Voting Policy covers ESG issues and is strictly applied by all investment teams as we believe that high standards of corporate governance are necessary for maximizing shareholder value. Our investment management teams therefore take ESG issues into consideration when voting each proxy. Our teams tend to vote in favour of ESG issues, while taking into consideration the impact on a company’s ability to create wealth.
 

2. Are sustainable investing and ESG factors integrated into your investment process and portfolio management decisions? If yes, please provide details.

The Integrated Fixed Income team takes a holistic approach to sustainable investing by combining ESG factors into their corporate credit framework. By including such factors in the investment process, the team seeks to gain greater insight into a company’s ability to manage risks and its ability to create sustainable value over the long term. If an area of concern is identified, the team assesses the potential impact this may have on the financial performance of the issuer. Additionally, when the team believes there could be a material impact on the business or financial profile of the issuer it is factored into the assessment of the issuer’s securities or the team modifies its judgement on the required returns to compensate for these additional risk factors.

See a detailed overview of the integrated approach in the chart below:

While ESG-related concerns can affect the teams’ investment decisions, the credit selection does not necessarily preclude investment opportunities based on ESG factors alone, since Fiera Capital recognizes that ESG factors are often intertwined with other factors that can affect the risk-return assessment of a given security. However, the team regularly elects to engage with issuers on ESG related subjects with the goal to express concerns and positively impact issuer behavior. The team believes that engagement can improve issuer performance and reduce their risk profile, while better aligning issuer’s behavior with our client’s interests.

To this effect, the team records the number of engagements they participate in and closely track ESG milestones. As the team is actively participating in funding discussions with corporate issuers on an ongoing basis, the team’s exposure to management teams is significant and the nature of the discussions gives the team the right levers for engagement which has led to companies adopting the recommendations of Fiera Capital’s analysts (i.e. greater board diversity, increased transparency in reporting, etc.).

Both investment teams offer strategies available with an ethical exclusion filter is applied in order to exclude companies that derive more than 10% of their revenues from adult entertainment, alcohol, firearms, gambling, military contracting, nuclear power, tobacco and cannabis.

3.a. Are you a signatory to the UNPRI?

Yes, Fiera Capital has been a Signatory of the United Nations Principles for Responsible Investment (UNPRI) since 2009.

3.b. If you are signatory to other coalitions, please list them.

Fiera Capital Corporation is a signatory to the Declaration of Institutional Investors on Climate Related Financial Risk, Net Zero Asset Managers Initiative and GRESB. The firm is also a member of the below:

  • Canadian Coalition for Good Governance
  • Responsible Investment Association
  • Canadian Bond Investors’ Association

3.c. Indicate any other international standards, industry guidelines, reporting frameworks, or initiatives that guide your responsible investing practices.

N/A

4. Please describe how ESG oversight and integration responsibilities are structured at your firm, including the process for escalation of key ESG issues. How do you obtain ESG information/data (e.g. public information, third party research, reports and statements from the company, direct engagement with the company)?

Oversight and accountability for Fiera Capital’s responsible-investing activities primarily fall under the auspices of the Office of the Global Chief Investment Officer (Global CIO) and the Chief Investment Officers and management teams of our subsidiaries. However, integrating the assessment of material environmental, social and governance (ESG) risk factors rests with each investment team, as they decide how to integrate ESG in a manner that best suits their particular investment style or asset class.

The CIO Office had two part-time resources dedicated to responsible investing and works closely with the investment teams to raise awareness for potential ESG related risks and supports the teams by providing tools and analysis on ESG factors. A former member of the CIO Office, Vincent Beaulieu, who is heavily involved with the firm’s ESG initiatives has recently been promoted to the position of Head of Risk and Responsible Investments and will continue to oversee risk management and responsible investment within the firm with the support of this broadened team.

As part of its continuous improvement process, in 2017, Fiera Capital established a Global ESG Committee ("Committee"). The Committee, which includes representation from internal stakeholders across functions and divisions, is mandated to oversee our responsible investing initiatives. The Committee sets new objectives for improvement on an annual basis and meets regularly to track the progress in implementing these improvements. Each objective is assigned to a subcommittee whose responsibility is to address this issue. Some of Fiera Capital’s affiliates also have their own ESG process to address issues specific to their market or asset class. This structure enables us to address many issues at once with the same level of depth and attention.

Fixed income teams benefit from the in-house expertise of the firm, draw upon the expertise of specialists and generalists and maintains a proprietary database of select current and historical ESG factors affecting Canadian corporate issuers. The analysis of ESG factors is performed based on various sources of information such as company disclosures, discussions with management, news items and third-party information from our external ESG research provider MSCI and Bloomberg. Insights generated by the database and other sources are used to generate engagement points with issuers and facilitate the discussion with management teams.

5. What channels do you use to communicate ESG-related information to clients and/or the public? Do you produce thought leadership (written reports and publications)? If so, is the information available to the public? Please provide links, if applicable.

Fiera Capital and its affiliates (where applicable) report on ESG and responsible investing related progress. Fiera Capital’s UN PRI Transparency Report, which describes our initiatives and progress during the year as well as expected activities for the year to come, is produced annually and is available to our clients and beneficiaries upon request. Additional ESG related information may also be made available to clients and beneficiaries upon request.

The 2021 UNPRI Assessment report for the year 2020 will be available in August 2021.

6. Do you have periodic reviews of your ESG process/approach to assess its effectiveness? What are the results? What would cause you to disregard ESG issues in your investment/analysis decisions?

All investment teams within Fiera Capital are given flexibility on how they integrate ESG factors within their respective investment approaches. While we do not conduct formal reviews of the investment teams’ approaches to responsible investing, please note that responsible investment efforts at the firm level have been continuously evolving over the past few years. Fiera Capital has taken numerous initiatives over the years in its efforts to strengthen its ESG/Ethical offering. As such, the firm is continuously refining the integration of ESG/Ethical criteria within its strategies to meet increasing demand for ESG/ Ethical strategies.

Fiera Capital also has a Global ESG Committee which is responsible for putting forward and assessing initiatives on ESG issues including proxy voting and engagement, ESG policies and marketing material to name a few. The Committee meets on a quarterly basis.

Additionally, Fiera Capital Proxy Voting policy is periodically reviewed and approved by the board of directors, with the latest review having occurred in 2021.

Climate

7. Describe how you identify, assess, and manage climate-related risks.

Environmental, social and governance (ESG) factors, including climate-related, are integrated into the fundamental investment decision-making process of the Integrated Fixed Income strategy. The team’s investment processes reflect the belief that organizations that successfully manage ESG factors create more resilient businesses/assets and are better positioned to deliver sustainable value over the long term. The team takes a holistic approach to sustainable investing by combining ESG factors into their corporate credit framework. Fiera Capital is of the view that climate change related risks are increasingly important in fundamental analysis of a company because they have the potential to materially affect company value in the long run. In its analysis, the team is breaking down climate related risks as follows:

  • Transition risks, which are often easier to identify, and the team is relying both on its own/internal credit analysis and analyses done by our ESG data providers to assess this risk. According to the UN PRI’s “Inevitable Response” document, there are definitely some sectors that are more exposed to that risk and most often than not, the higher risk companies will be the ones that are lagging their peers in terms of carbon emissions (higher carbon intensity) and those that don’t have any plans to shift some of their operations.
  • Physical risks, which on the other hand, are a little bit harder to identify and monitor. We are aware of many tools that are being developed to better capture the potential impact on portfolio returns but methodologies still need to be fine-tuned.

When the team believes there could be a material impact on the business or financial profile of the issuer it is factored into the assessment of the issuer’s securities or the team modifies its judgement on the required returns to compensate for these additional risk factors. ESG factors have been at the core of the Credit Review process and Relative Value assessment since 2000 and are used to assess required return and issuers investment recommendations.

8. Describe the climate-related risks and opportunities you have identified over the short, medium, and long term.

Although material/key climate-related risks do vary from industry to industry, the team expects transition risks to be something that will most likely have more impact in the short to mid-term. Physical risks related to climate change are on the other more likely to have greater impact in the medium to long term, as the frequency and intensity of climate change related disasters is more likely to increase.

In the Canadian landscape, the key sector that the team has identified to be exposed to transition risk is the energy space. In recent years, the team has regularly passed on new issues of Integrated Oil & Gas companies (esp. long bonds), as the team is becoming increasingly concerned about stranded asset risks with traditional oil companies. While the companies are still generating very strong cash flows today, the energy transition is posing significant challenges requiring these companies to make substantial investments in technology to e.g. meet emission reduction targets and other environmental standards. Also, with increasing electrification of mobility, there is growing risk of oil losing its relevance as the main energy source. Since we only invest in strong actors in this space to begin with and in companies that have outlined a clear path towards emission reduction going forward, we are mostly staying away from long dated maturities of these issuers (e.g. >15yrs) as uncertainty around stranded assets etc. will challenge the business model over time.

Regarding physical risks, the team is still looking to get a better sense of assessing how these will impact sectors (e.g. insurance sector where we already observe increasing claims as a result of changing weather patterns) and other sectors.

9. Describe the resilience of your investment strategy, taking into consideration different climate-related scenarios.

When assessing the resilience of their investment strategy the team is currently mainly relying on credit analysis factoring in above data, but also extensively leverage MSCI ESG research.

Fiera is currently on the lookout for tools that may be used to properly assess physical risks and transitions risks over the very long term but have yet to find one that best suits our needs. Exploring climate related scenarios is one of the key features we are looking for in the potential new tools.

The investment strategy is resilient and allows for consistent outperformance across market environments as a result of the investment process's dynamic approach which aims to exploit diversified sources of alpha. Top-down factors, including duration, yield curve, and sector positioning, allow the team to define their strategy and establish a quantitative framework. Bottom-up factors focus on credit research reviews which helps portfolio managers identify attractive securities. Environmental, Social and Governance (ESG) factors, including climate change related risks are accounted for in the fundamental analysis of a company because they have the potential to affect company value in the long run. Additionally, our ESG data provider provides us with different carbon metrics that are used in our own carbon monitoring and carbon attribution reports. The investment team has been increasingly getting their hands-on carbon data in order to fully integrate this factor whenever it is relevant for the specific company being analyzed. The team is also leveraging the data to work towards its goal to effectively quantify the carbon footprint of its portfolios in relation to their respective benchmarks.

10. Do you track the carbon footprint of portfolio holdings?

Fiera Capital can provide carbon reports and carbon attribution reports for our different portfolios and benchmarks.

If yes, please describe the methodology and metrics used, and whether you have a set target for reducing the portfolio's footprint.

Through MSCI ESG research, we have access to carbon emissions data and other carbon related factors. Although emissions could be reported in multiple different ways, we most often use carbon emissions of scope 1 and scope 2 to calculate carbon intensity (total tons of CO2 equivalent normalized by total sales in M$USD).

Our proprietary ESG scoring has also allows for customization to achieve client objective. This may include Fossil Fuel Free portfolios that excludes debt from energy companies, as well as issuers in nonenergy sectors with high carbon intensity, strategies focused on excluding issuers with a high risk of loss from current or past controversies and carbon intensity focused portfolios that seek to reduce the portfolio’s carbon footprint over time or relative to a benchmark.

11. What are your firm's emissions? Please demonstrate how/whether you are taking steps to reduce these emissions.

Fiera Capital does not track its overall emissions as a firm. However, Fiera Capital’s employee led Global Corporate Social Responsibility Committee has the objective of developing the firm’s green initiatives to encourage more environmentally friendly practices.

In order to minimize the depletion of natural resources and to reduce waste and greenhouse gas emissions, Fiera Capital applies sound environmental practices to all operations. Depending on the office these practices include, but are not limited to:

  • Improved sorting for recycling/garbage
  • Eliminating single use products: straws, cups, water bottles
  • Battery & electronic waste recycling
  • Limiting energy usage by having motion sensors on the floor and in offices & using energy efficient lightbulbs
  • Replacing bottled water with pitchers for onsite meetings
  • Considering local caterers that are more sustainable and use either reusable plates/cutlery or compostable containers
  • Incorporating sustainable considerations for office supplies that limit waste & are more earth friendly (less plastic)
  • Replacing coffee pods with ground coffee

Diversity

12. Please provide the composition of your senior leadership team and board of directors, including women and visible minorities. How do you encourage diversity of perspectives and experience?

Fiera Capital has placed emphasis on the diversity of its talent. This fundamental principle is at the heart of our strategic vision, as it is the complementarity nature and expertise of our people that drive our growth ambitions and elevate our firm to the highest level of excellence.

In early 2021, the creation of the Corporate Social Responsibility (CSR) – Diversity, Equity and Inclusion (DE&I) Committee replaced the Corporate Social Responsibility (CSR) Committee.

This new Committee focuses on implementing a DE&I action plan to better position Fiera Capital in these areas and continue to promote a culture that is open to demographic, social, cultural and religious differences, and where employees feel valued, respected and accepted.

Fiera Capital is proud of both the strength and pedigree of its current board, which is comprised of both senior executive management, as well as independent members. The independent members are highly respected Canadian and US business leaders. As of June 30, 2020, our firm’s Board of Directors is composed 11 individuals, which includes 1 director who identifies as a woman. Fiera Capital’s C-Suite is composed of 19% women and 13% who identify as a minority. Human capital is arguably the firm’s single greatest asset. Fiera Capital’s success is rooted in its strong teams unified by a common purpose and shared passion. Accordingly, we place great importance on recruiting and retaining the best talent and investing in the training and tools that enable employees to grow. Fiera Capital launched our Global Respect and Inclusion Policy, as part of Fiera Capital’s People strategy on Diversity and Inclusion in 2018. All employees were invited to celebrate and pledge their commitment by signing a Diversity Certificate during a globally organized event. We embrace our employees’ diverse backgrounds and view our people as central to our success. We are committed to fostering a culture of inclusivity and diversity that promotes equality and respect through a harmonious and collaborative work environment. Diversity encompasses differences in backgrounds, qualifications and experiences as well as differences in approach and viewpoints. These differences include gender, gender identity, sexual orientation, age, ethnicity, religious or cultural background, disability, marital or family status, and other areas of potential difference. The Global Respect and Inclusion Policy is applicable, but not limited, to Fiera Capital’s practices and policies on recruitment and selection, compensation and benefits, professional development and training, promotions, transfers, social and recreational programs, layoffs and terminations as well as to the ongoing development of a work environment built on the premises of diversity and equity which encourage and reinforce respectful communication and cooperation between all employees. This policy applies to everyone at Fiera Capital, including employees, vendors, contractors and third-party service providers, in all locations where company business is conducted.

In 2018, Fiera Capital became a founding member of an ambitious new initiative: the Diversity Project North America. Developed originally in the UK and now championed in North America by The National Investment Company Service Association (NICSA), a not-for-profit industry trade association, the Diversity Project North America brings together more than 30 leading asset managers with the goal of accelerating progress towards a more inclusive culture across all dynamics, including gender, ethnicity, sexual orientation, age and disability. In 2019, we launched our first cohort for The A Effect's "Défi 100 jours". Over the course of 100 days, a cohort of professional and ambitious women lived a unique journey of professional development that included workshops, encounters with inspiring leaders, web conferences and an exclusive learning platform, all designed to help women better communicate their ambition, boost their confidence and their influence, encourage them to take risks and develop their networks. Fiera Capital continued to bolster its reputation as a champion for the advancement of women in leadership roles, through its sponsorship of the U.S. division’s third annual “Spotlight on Women” event, along with new initiatives that included events to celebrate International Women’s Day on March 8, 2019.

Proxy Voting

13. What proportion of the time do you vote with or against management on shareholder resolutions, board appointments, and auditor appointments? What proportion of the time do you vote with or against management on ESG issues? How does this break down for climate, diversity, and remuneration issues?

Proportion of the time Fiera Capital votes instructions with or against management on shareholder resolutions:

  • With Management: 112 (34%)
  • Against Management: 205 (66%)

Proportion of the time Fiera Capital votes instructions with or against management on board appointments:

  • With Management: 5,620 (95%)
  • Against Management; 331 (6%)

Proportion of the time the Fiera Capital votes instructions with or against management on auditor appointments:

  • With Management: 428 (96%)
  • Against Management: 15 (4%)

Proportion of the time Fiera Capital votes instructions with or against management on climate related issues:

  • With Management: 3 (25%)
  • Against Management: 13 (75%)

Proportion of the time Fiera Capital votes instructions with or against management on board diversity and EEO (Equal employment opportunity) related issues:

  • With Management: 10 (60%)
  • Against Management: 7 (40%)

Proportion of the time Fiera Capital votes instructions with or against management on remuneration related issues:

  • With Management: 16 (41%)
  • Against Management: 25 (59%)

14. What proportion of all independent ESG shareholder resolutions do you support?

Fiera Capital supported independent ESG shareholder resolutions 70% of the time. 

15. What proportion of remuneration packages do you vote in favour of? In your view, is the current level of executive remuneration too high, too low, or about right? How is this view reflected in your voting record on remuneration?

Fiera Capital votes in accordance with the firm’s proxy voting guidelines 40% of the time and against management 60%.

16. Have you ever co-filed an ESG-related shareholder resolution? If so, how many and with what frequency?

No, we have never co-filed an ESG related shareholder resolution. 

17. Have you ever voted against a director for explicitly ESG-related reasons? If so, why? If not, would you consider doing so in the future?

This is not a metric that Fiera Capital currently tracks and as such we cannot provide an example at this time. We have never and would never rule out the possibility of voting against a director explicitly for ESG-related reasons. 

Engagement

18. How many companies do you engage with? What proportion of your engagements focus on environmental and social issues? What are your engagement goals? Are these goals outcome/action- based (e.g. decreases in emissions or increases in number of women on the board) or means-based (reporting on emissions or number of women on the board)?

The IFI team regularly elects to engage with issuers on ESG related subjects with the goal of positively impacting issuer behavior. The team believes that  engagement can improve issuer performance and reduce their risk profile, while better aligning issuer’s behaviour with our client’s interests. As the team is actively participating in funding discussions with corporate issuers on an ongoing basis, the team’s exposure to management teams is significant and the nature of the discussions gives the team the right levers for engagement.

The team had 58 meetings with Management teams of Corporate Issuers in H1 2021 (vs. 92 in FY 2020 and 109 in FY 2019). The team actively engaged on ESG related subjects ~33% of time. Engagements can be broken down as follows (by area of Engagement – since we actively started tracking our Engagement efforts in January 2019):

  • Environmental: ~41%
  • Social: ~11%
  • Governance: ~48%

To date a large share of their engagements were means-based (e.g. focused on improving disclosure), but the engagement goals vary substantially and observe an increasing share of goals based engagement (e.g. their large scale engagement with the Canada Energy sector in H1 2021, during which they e.g. discussed the urgency for reducing emissions). In either case, the team keeps track of engagements and monitors the outcomes. See also further detail of our engagement efforts in the charts below.

19. What is your policy around the escalation of engagement; how and why might this happen and what is the ultimate tool you might use (e.g. voting against board re-election, etc.)?

As the team is actively participating in funding discussions with corporate issuers on an ongoing basis, the team’s exposure to management teams is significant and the nature of the discussions gives the team the right levers for engagement. Should an engagement not deliver the right outcome and/or the team will conclude that they are not adequately compensated for ESG specific risks related to the issuer, the team would typically pass on the new issue and/or provide specific feedback to the issuer (either directly or through the dealers). Additionally, in some cases where they already have substantial exposure to an issuer, the team might decide to exit a bond position. Since they are fixed income investors, voting against board re-election etc. are tools that are typically not available to them.

Appendices