Across fixed income, we integrate ESG considerations into our investment decision-making process, which is aligned with both our investment strategy and Canada Life Asset Management’s wider responsible investment strategy.
In fixed income, we believe there is a strong correlation between issuers with strong ESG performance and secure investment returns over the long term.
As with equities, we want companies in which we invest to continuously seek opportunities to change their behaviours in meaningful and lasting ways. We see engagement with our investee companies as an effective tool to delivering wider economic, social and environmental change.
Before we invest:
- We first screen using a third-party research tool, before conducting our own assessment for companies that are flagged by the tool
- We review against two exclusion criteria: non-compliance with the Global Compact standards and exposure to thermal coal
- We review new investments (and existing investments, annually) against relevant ESG factors, assigning a red/amber/green rating for each of Environment, Social and Governance:
- Environmental factors evaluate the impact of a company’s operations on the environment including its use of natural resources. The ‘E’ factors we assess include (1) Carbon Emissions and Air Quality (2) Effluents and Waste (3) Land Use and Biodiversity (4) Resource Use and Management.
- Social factors evaluate the company’s operations as good corporate citizens with regards to Access to Basic Services, Community Relations, Data and Privacy Security, Human Capital, Occupational Health & Safety, Human Rights and Product Recalls and Safety.
- Governance factors assess the company with regards to Board/Management Quality and Integrity, Ownership and Shareholder Rights, Audit and Financial Reporting and Financial Strategy and Risk Management.
After we have invested:
- We engage with all issuers identified with a red indicator for either E, S or G, seeking to contribute to positive change, and making clear our expectations and position
- We review the investment strategy for ‘red’ holdings monthly to determine whether to ‘Hold and Invest’, ‘Hold and Review’, or ‘Opportunistically Reduce’
- We also consider investment term limits for some issuers following our assessments of the short-, medium- and long-term implications of the factors driving the red score