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.


Responsible Investment Policy

Over the years, the growth and diversification of Fiera Capital’s operations created the need for a global policy that would govern the firm’s initiatives with respect to responsible investing and enable the organization to coordinate the practices of all our divisions and subsidiaries in this area.

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.

Proxy Voting Guidelines

Proxy voting is a key tool for Fiera Capital’s integration of ESG risk factors in its investment processes. The firm exercises its voting rights in order to maintain the highest standard of corporate governance and sustainability of the business and practices of the companies whose shares are held. High standards are necessary for maximizing shareholder value as well as protecting the economic interest of shareholders.

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

Yes, sustainable investing and ESG factors are integrated into Fiera Capital’s investment process. As a firm, we believe that companies that follow sound ESG practices will, in general, prove to be better investments in the long run than those who fail to run their businesses in a fashion that benefits both the environment and society. We therefore consider certain ESG criteria when analyzing companies.

Fiera Capital is recognized as leader in the responsible investment field as we offer a variety of ESG strategies in Canadian, U.S. and International Equities, as well as Fixed Income strategies with ethical considerations. With regards to those specific strategies, there are two elements to screening companies when analyzing the merits of each investment from an ESG perspective.

The first screen that managers employ excludes companies based on the products they manufacture, the geographic area in which they operate, or alternatively their performance record in specific areas. This will typically result in the exclusion of companies that derive more than 10% of their revenue, either directly or indirectly, from the following products: adult entertainment, alcohol, firearms, gambling, military contracting, nuclear power, tobacco and cannabis. The list of ineligible companies is provided by MSCI ESG, a leading independent firm in ESG research and analysis, on a monthly basis for the Canadian, US and International Developed Equity markets.

The second screening involves qualitative analysis. As there are no truly “black or white” corporate entities, it is necessary to examine corporations in their totality to choose those companies that on balance are employing sound social and environmental practices. This requires a “best practices” approach and ranks individual entities against their peers in the same industry. As no company is perfect, we are looking for companies that demonstrate an awareness of ESG issues and are making an effort to improve areas of weakness. Additionally, thematic or impact strategies can also be tailored to clients’ specific needs, such as “green” strategies or infrastructure debt that emphasize investment in essential infrastructure with a social purpose. Such strategies may apply exclusionary filters or may target specific types of investments.


Finally, Fiera Capital’s CIO Office, in collaboration with the firm’s in-house risk measurement team and MSCI ESG, have developed tools to assess the ESG performance of securities held in each portfolio. Companies that score poorly in any of the three ESG areas are further analysed in order to better understand the rationale and implications of the scores and company practices. While for portfolio managers or investment analysts, no specific goals are set in terms of the integration of responsible investing or ESG scores, we expect the managers to hold companies having good policies and disclosure on environmental, social and governance issues that are well positioned in relation to an industry peer group, and present no major controversies that could negatively impact stakeholders.

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

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

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

The Firm is also a member of the Canadian Coalition for Good Governance, the Responsible Investment Association, the Canadian Bond Investors' Association, a signatory to the Declaration of Institutional Investors on Climate Related Financial Risk and most recently GRESB. 

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)?

Fiera Capital is a research-driven investment firm. Independent research is a core tenet of our investment approaches, and this also applies to integrating material ESG factors into our investment processes. In-house expertise and analysis are complemented by third-party research and recommendations from various external ESG service providers. 

Fiera Capital’s CIO Office is thoroughly involved in the implementation of the firm’s ESG initiatives and provides substantial support to Portfolio Managers to help them understand the ESG-related issues faced by certain companies. The CIO Office is also in charge of leveraging relationship with ESG research providers (ISS, and other potential ESG research providers), participates in a local group of PRI signatories striving to promote acceptance of the Principles, promotes good governance practices in conjunction with the CCGG, maintains and reviews the Guidelines and Policies on responsible investments when deemed appropriate. 

As part of its continuous improvement process, in 2017, Fiera Capital established a Global Corporate Responsibility committee. The Committee includes representatives from all functioning groups and all regions in which Fiera Capital. 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. 

Finally, please note that all portfolio managers and analysts are aware of the implications of managing ESG strategies and apply the firm’s ESG framework consistently when making investment decisions. 

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 2020 UNPRI Assessment report for the year 2019 is included in Appendix to this document. 

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 2019. 

Climate

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

Fiera Capital is of the view that climate change related risks need to be accounted in the fundamental analysis of a company because of the potential to affect company value in the long run. Transition risks are often easier to identify, and our investment teams can either rely on their own analysis, or the ones done by our ESG data provider to assess this risk. According to the UN PRI’s “Inevitable Response” document, some sectors are more exposed to climate-related risks 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 their operations. 

Although we have not issued a firm wide official strategy, we do accommodate clients needs regarding carbon risk. Some of our clients have asked for mandates where carbon emissions are greatly reduced by using exclusions strategies (FFF mandates), while others have asked for regular carbon monitoring of their portfolios. Our ESG data provider provides us with different carbon metrics that are used in our own carbon monitoring and carbon attribution reports. 

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

Although material climate-related risks do vary from industry to industry, transition risks tend 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 hand other more likely to have a greater impact in the medium to long term, as the frequency and intensity of climate change related disasters is more likely to increase. 

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

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?

Yes

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

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

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, our Global Corporate Social Responsibility Committee has the objective of developing the firm’s green initiatives to make Fiera Capital a more environmentally friendly company. 

While we do not track the overall carbon footprint of all our investments, we provide carbon reports and carbon attribution on a strategy or mandate basis. 

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 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?

Please note proxy voting does not apply to fixed income investments. Please note that the voting statistics illustrated below are from January 1st, 2020 up until August 20th, 2020. The stats are a representation of the ballots for each unique holding across all investment strategies and portfolio management teams that are part of the Canadian division’s investment platform. 

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

  • With Management: 112 (35%)
  • Against Management: 205 (65%)

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

  • With Management: 5,620 (94%)
  • Against Management; 331 (06%)

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

  • With Management: 428 (97%)
  • Against Management: 15 (03%)

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

  • With Management: 3 (19%)
  • Against Management: 13 (81%)

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 (59%)
  • Against Management: 7 (41%)

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

  • With Management: 16 (39%)
  • Against Management: 25 (61%)

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

Fiera Capital supported independent ESG shareholder resolutions 68% 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. Fiera Capital voted instructions with management on remuneration related issues 39% of the time and against management 61% of the time. 

Our Canadian Equity team recently wrote a report on executive compensation for all companies that are part of the S&P TSX and we can provide their findings upon request. 

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)?

We believe the value of engagement is best derived from direct dialogue with companies in which we invest or with service providers that we utilize. As such, we allow our investment teams to implement engagement practices they deem most appropriate to their investment style. 

When meeting with companies, portfolio managers may address ESG issues: on a proactive basis, to raise awareness on such issues with companies within their portfolio; or on a reactive basis, to raise issues that have already occurred in order to understand how management is or has addressed them. Ongoing dialogue extends beyond short-term financial metrics and earnings to management’s long-term strategy, and may include considerations such as firm culture, sustainability, governance practices and disclosure. 

We encourage companies to recognize the importance of ESG factors and support their efforts to improve transparency and disclosure of their approach and performance as they relate to material ESG issues. In addition to engaging with companies, we engage with financial market service providers to encourage the implementation of responsible investing practices. 

The investment 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. 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. In 2019 alone, the team had >100 meetings with management teams and in more than 40% of the meetings, the team engaged on ESG related subjects. Discussions with issuers continue over an extended period and the team documents meetings / monitors engagement results. Over the past two years the team has with increasing frequency reported back to clients on the outcome of specific engagements. 

When appropriate, we also engage with regulatory entities on a broad spectrum of responsible investment issues that are aligned with our beliefs and guiding principles. 

Here are two examples of engagement activities held by the Integrated Fixed Income (IFI) team: 

1) Major Canadian REIT – Engaged to incentivize Issuer to develop ESG/Sustainability Framework

  • We continuously provided comments and feedback to management of a major Canadian REIT with the goal to highlight the benefits the company would have from implementing an ESG/Sustainability framework.
  • We argued that a framework would allow the company to better demonstrate the integration of new efficiency initiatives for its real estate portfolio.
  • On several occasions, we emphasized to management that ESG factors are taken into consideration when pricing the issuer’s bonds. In other words, ESG factors are integrated into our portfolio management process.
  • Finally, we mentioned to the company that some peers are well advanced in their respective
  • ESG/Sustainability framework and have already demonstrated some good progress.
  • Partially due to ongoing discussions between Fiera Capital and management, the company published and fully integrated a new Sustainability framework in February 2019.

2) Canadian Insurers – Ongoing engagement to shape Green Bond framework/definitions

  • Canadian life insurers have been active this year in publishing new ‘Green Bond/Sustainability’ frameworks.
  • We have had meetings with three of the main insurers on various occasion over the past 12 months, during which we discussed their Green Bond/Sustainability framework definition.
  • Being a key investor, we highlighted points that are of particular interest to us and that we have embedded in our portfolio management process.
  • We also emphasized the need for having clear definitions of key terms, esp. around use of proceeds, eligibility criteria and reporting.
  • The insurers listened to our feedback and we found our feedback incorporated in the final “Sustainable Bond” framework of one of them, which was first published in March 2019.

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.)?

Our investment teams are given flexibility as to how to integrate ESG factors in their investment processes and are acutely aware of the effect of ESG factors on the overall portfolio risk/return profile. As such, there have rarely been occurrences when an ESG investment issue had to be escalated. 

However, the Global CIO office serves an oversight role and ESG issues that are not resolved at the portfolio management level would ultimately be escalated to the Global CIO Office for further analysis. As such, if an account owns a security with major ESG issues the Global CIO office will ask the manager to explain the reasoning behind the position. The assessment of the response to an event is essential and we always favour a proactive approach in order to avoid negative surprise elements on operations, profit, and impact on the financial position or the reputational risk. 

Appendices