March 7, 2023
- Sets industry-leading guidelines for climate risk disclosure in the audit process
- Expands expectations for board diversity to include ethnic and racial representation
- Takes action to ensure separation of CEO and board chair roles in Canada and the U.S.
VICTORIA, British Columbia – Today, British Columbia Investment Management Corporation (BCI) released the 11th edition of our Proxy Voting Guidelines outlining our increased expectations on climate change disclosure, diversity, corporate governance roles, and protection of shareholder rights.
“Proxy voting is a key shareholder right and powerful tool for BCI to drive action aligned to our clients’ best interests,” said Daniel Garant, executive vice president & global head, public markets. “We consistently leverage voting to make our expectations clear and hold companies and their boards accountable on material issues like climate change and diversity.”
CLIMATE RISK DISCLOSURE
Building on our industry-leading climate risk disclosure requirements, BCI’s 2023 guidelines include the expectation for climate-related metrics and risk considerations in the audit process. As a means to escalate our engagement with high-emitting companies, this guideline enables BCI to hold directors accountable when they fail to ensure climate risk is incorporated into corporate disclosures rigorously and accurately, including some level of assurance. We have also added a focus beyond disclosure to target unsatisfactory performance on climate change risk management, which could result in votes against the relevant board committee or entire board of directors, including the CEO.
“It is critical that investors understand how climate assumptions are affecting financial statements and, in turn, company performance,” says Jennifer Coulson, senior managing director & global head, ESG, BCI. “BCI has been increasing our support for more prescriptive shareholder proposals and voting against directors for weak responses to climate change. Our new guidelines give us another avenue for escalation to hold companies accountable on climate risk.”
For companies in high emitting sectors, BCI may vote against a company’s financial statements if they lack sufficient details on climate change risk to the company’s operations and finances and may vote against audit committee members if there is no reference to climate risk impacts in the auditor’s opinion.
DIVERSITY BEYOND GENDER
Since 2021, BCI has been at the forefront in holding boards to account for a lack of ethnic and racial diversity on boards in the U.S. Starting in 2023, we will apply this guideline to the Canadian market and will expand to other markets as disclosures permit. BCI maintains its expectation of 30 per cent female representation on boards where practical to implement, while increasing our expectation for Japanese boards to have at least one female director.
- BCI will vote against the chair of the nominating committee if a board lacks adequate racial or ethnic diversity
- BCI will vote against top executives on Japanese boards if the board lacks adequate gender diversity
SEPARATING BOARD AND MANAGEMENT POWERS
Since a board chair plays a key role in hiring and firing a CEO, the roles must be separated in order to protect shareholders’ interests. Targeting the CEO directly is rare among investors and escalates our voting strategy from exclusively holding the nominating committee accountable.
- BCI will consistently vote to ensure the separation of chief executive officer and board chair roles
PROTECTING SHAREHOLDER RIGHTS
BCI has long supported the principle of one share, one vote but multi-class share structures, occurring when some shareholders have unequal voting rights over others, continue to negatively impact shareholders. To ensure the protection of shareholder rights, we will begin holding directors accountable for unequal voting rights at Canadian and U.S. companies.
- BCI will vote against independent board chairs or lead directors and governance committee chairs at companies with unequal voting rights unless there are mitigating factors such as reasonable sunset clauses
Other material updates to our Proxy Voting Guidelines include supporting more employee ownership plans if dilution is reasonable and explicitly stating our continued support for shareholder proposals requesting improved disclosure and adoption of policies and practices related to reconciliation and Indigenous inclusion.
As an active owner, proxy voting is one of several ways BCI engages companies to encourage adoption of best practices that add long-term value to shareholders, including our clients. We update our guidelines every two years. For more information, see our Proxy Voting Guidelines as well as a searchable database of our proxy voting records here.
Olga Petrycki, Director, External Stakeholder Engagement
British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada with C$211.1 billion under management, as of March 31, 2022. Based in Victoria, British Columbia, with offices in Vancouver, New York City, and London, U.K. BCI is invested in: fixed income and private debt; public and private equity; infrastructure and renewable resources; as well as real estate equity and real estate debt through our independently operated platform company QuadReal Property Group. With our global outlook, we seek investment opportunities that convert savings into productive capital that will meet our clients’ risk and return requirements over time. This compels us to integrate long-term ESG matters into all investment decisions and activities. BCI’s clients include pension plans representing over 715,000 plan members, insurance funds providing more than three million Autoplan insurance policies annually, benefits coverage to more than two million workers and 225,000 companies, and special purpose funds within BC’s public sector. Founded in 1999, BCI is a statutory corporation created by the Public Sector Pension Plans Act.