Category: Uncategorised

Introducing May Han, Director of Investment Accounting at BCI and a dedicated volunteer board member helping non-profits in Victoria and beyond.  

With the belief that helping just one person contributes to the betterment of the community as a whole, May has always looked to leverage her knowledge and experience to bring about change at the governance level. 

One of the organizations May volunteers with is Victoria Women’s Transition House (VWTH), an organization dedicated to advocating and supporting women affected by intimate partner violence. 

Q: What motivated you to get involved with Victoria Women’s Transition House? 

A: When I moved to Victoria a couple of years ago, my past journeys with women who have experienced intimate partner violence and abuse motivated me to contribute to the local community through VWTH. With my previous experiences with volunteer board positions, and the many passionate individuals involved in the organization, I felt that getting involved at a governance level would help drive VWTH to achieve their vision and mission. 

Q: How are you sparking change in our community?  

A: Volunteer organizations are always in need of help at every level, from hands-on interactions with the community to behind-the-scenes planning, financial stewardship, and fundraising, to fulfill their purpose. I’m privileged to work alongside bright individuals from diverse backgrounds to support the organization’s community initiatives, leveraging my experience and knowledge in finance, risk management, strategy, and accounting to effect change. For example, with VWTH, I’m involved in an exciting project in collaboration with the Government of British Columbia to build and operate a four-storey building with 50 residential units to offer transitional housing and support services for women and their children. The opportunity to make a difference in an ongoing issue is a rewarding experience, as VWTH continually supports and improves the lives of women and their families. 

Besides VWTH, I support four other non-profit governance at the board level including Connections Place in Victoria, as well as Alberta Lung, YWCA Edmonton, and E4C in my home city of Edmonton. Each organization focuses on ambitious projects to increase their impact in the community. I’ve taken on various roles such as vice chair/president, treasurer, chair of finance & audit committee, secretary, chair of governance committee, chair of nominations committee, and as a board director at large, depending on the organization’s need. 

Q: What advice do you have for those looking to get involved in their communities?  

A: Volunteering is an incredibly rewarding experience. From the impact made for others, to the experience and connections gained, volunteering is a way to pursue a passion while leveraging your talents and experience to support the community. When you help even just one person, you’re contributing to the betterment of the entire community. 

Start by defining what volunteering means to you personally, and identify your “why” – the goals, values, and interests that drive you. Then, look for organizations that align with your “why,” making your investment of time more meaningful. Finding organizations aligned with your “why” doesn’t have to be something you do alone. For example, multiple team members at BCI have gotten out to help spruce up VWTH shelters and decorate for Christmas, making a group impact. 

Non-profits are always in need and are often understaffed and underfunded. There are so many ways to get involved that don’t require a huge commitment, fits with your lifestyle, and can help you grow. 

BCIers volunteering at VWTH this April 

BCI offers every employee 14 hours of paid volunteer time each year to make a difference where we live and work. We appreciate our many team members who are champions in our communities. They are part of how we foster a culture of caring and make a positive impact for all. 

Learn more about how we give back at BCI.ca/community 

BCI’s Global Partnership Fund (GPF) has a distinct and flexible mandate that allows the team to pursue opportunistic investments including those driven by or linked to systemic ESG trends like climate change. We launched the GPF as an actively managed investment fund in 2019 to generate returns in excess of the MSCI World ex-Canada Index through the employment of both traditional long-only equity security selection and absolute return strategies. Absolute return strategies give our clients access to investments that are expected to deliver positive returns irrespective of broader market performance and have low correlation to equity markets, with strong downside protection.

Rod Prat, Managing Director, Partnership Portfolio, shares how the GPF considers sustainability themes in its strategies and his perspective on future ESG trends and opportunities.

Why is the GPF uniquely positioned to invest in sustainability-related themes?
RP: Across BCI, we strive to understand and manage ESG-related risks while identifying underlying ESG factors that could inform future investment opportunities by collaborating closely with our dedicated ESG team and colleagues throughout the organization. The GPF is differentiated by a distinct mandate to invest in absolute return strategy investments that does not constrain us to a specific asset class. We have the flexibility to be highly opportunistic and explore a diverse range of asset types and structures. A key advantage of this is our ability to invest in unique deals that may not have a natural home within BCI’s other funds and strategies, including those that not only aim to deliver on the fund’s investment objectives, but also seek to deliver positive sustainability outcomes. For example, the GPF can allocate capital to environmental commodity markets and niche sectors that are important to advancing global ESG and climate-related ambitions.

With such a wide mandate, can you elaborate on the types of deals you look for and provide some examples of the GPF’s recent sustainability-themed investments?
RP: Investments that fall into our absolute return strategies’ investable universe seek to achieve positive returns in rising, falling, or flat market conditions. This can include fund investments, co-investments, and direct investments that capture pricing discrepancies, market inefficiencies, and other opportunities not directly tied to the performance of market indices.

The GPF has invested in a range of opportunities that align with sustainability themes. We tend to focus on market inefficiencies and situations that require nimble, opportunistic capital versus large-scale projects and investments that are more suited to BCI’s other assets classes like infrastructure & renewable resources. For example, AB CarVal’s Clean Energy Fund II, which invests in lending opportunities in clean energy generation and storage assets. Our relationship with AB Carval also led to two sustainability themed co-investments last year.

Another recent investment that shows the flexibility and uniqueness of the GPF’s mandate is Three Hills Capital Partners, a European-based manager with a diverse portfolio of assets across Europe and North America. The GPF recently committed to its Impact Fund I S.C.Sp., which aims to make a positive difference by investing in innovative and impactful mid-cap businesses that address environmental or social challenges. The fund invests in secured debt and preferred equity instruments, seeking out business models that promote solutions to these challenges.

The ESG landscape is evolving quickly. Where are you seeing the most interesting opportunities and trends?
RP: We are excited about new and emerging opportunities resulting from the global push towards a low-carbon economy. As the world transitions to renewable power sources, there is an increasing need for advancements in storage solutions, large-scale low-cost batteries, and sustainable supply chains for critical minerals. Innovations in clean carbon technologies and carbon capture have also proven essential for reducing global greenhouse gas emissions and achieving broader sustainability goals. These trends are creating opportunities from exploration and extraction to processing and production of finished products.

The GPF’s structure and investment objectives enable us to participate in these themes across the entire supply chain by way of optimal, downside-protected structures and asset class types. For example, we are invested in asset-based credit and private credit investments for renewable energy projects, green buildings, commercial and industrial solar and wind-powered assets, storage solutions, and carbon capture and storage. We are also invested in opportunities that benefit from the need for battery metals, and environmental commodity markets that provide financial incentives for emissions reduction and promote renewable energy generation.

Our team is always looking for unique deals that meet the risk-return characteristics of our investment mandate and we anticipate that ESG trends and global action on climate change will continue to present attractive opportunities for our clients.

Learn more about the GPF in BCI’s 2023-2024 Corporate Annual Report.

Meet Zaman Velji, Senior Managing Director, Infrastructure & Renewable Resources at BCI. While Zaman’s work takes him around the world, he finds fulfillment in giving back at home. 

Zaman served on The Victoria Foundation’s Board of Directors for the past eight years, holding roles from board chair to investment committee member, where he leveraged his unique investment background to help oversee the organization’s $500 million in assets. 

Founded in 1936, the Victoria Foundation distributes $1.5 million in critical funding to non-profits in Victoria and across Canada, aligned with its mission of connecting people who care with causes that matter. As Zaman steps off this board, his passion for his local community is stronger than ever. 

Q: Why did you get involved with the Victoria Foundation? 

A: Community service has always been a significant aspect of my life. It stems from a sense of civic duty, as a Canadian, as well as in my upbringing as an Ismaili Muslim, which stresses the importance of serving the world at large; not as an act of charity, but rather as a path towards enlightened self-fulfillment. And it’s true: throughout my life, experiences as a volunteer have been immensely formative and personally rewarding. My involvement with the Victoria Foundation began shortly after I settled in Victoria. This work has been a wonderful opportunity to learn more about Victoria and the communities of Vancouver Island, and to show appreciation for this place I feel blessed to call home. 

Q: How are you sparking change in our community? 

A: There is so much that the Victoria Foundation does in our community, and it’s been an honour to have played a small part over the past eight years. A notable accomplishment of my tenure as chair was the launch of the Rapid Relief Fund at the onset of the COVID-19 pandemic. This fund raised over $6 million in support of local organizations at a time of tremendous uncertainty and urgent need. 

Over the years, it has also been satisfying to help evolve the Victoria Foundation’s investment mix as the size of its endowment grew. This included making investments in new asset classes, re-assessing manager relationships, and designing governance for a newly launched impact investment program. We all have an opportunity to leverage our skills and abilities to make a difference, and this was a great fit for me. 

Q: What advice do you have for those looking to get involved in their communities?  

A: Don’t hesitate. Even the smallest acts of compassion and service matter, and there will always be a need. By putting yourself out there, you may be surprised by where you find purpose. Hopefully it comes with new opportunities to connect with your local community and the place you call home. 

If you’re interested in getting involved with the Victoria Foundation, visit victoriafoundation.bc.ca 

BCI offers every employee 14 hours of paid volunteer time each year to make a difference where we live and work. We appreciate our many team members who are champions in our communities. They are part of how we foster a culture of caring and make a positive impact for all. 

Learn more about how we give back at BCI.ca/community 

Introducing Michael Cavallin , Manager, Cyber Security & Risk at BCI. Not only is Michael a cybersecurity expert, but his volunteer work is out of this world, literally. Michael volunteers as a mentor, providing cybersecurity advice and design consultation for the Optical Reference Calibration Satellite (ORCASat) team. He believes that cybersecurity is essential to many aspects of our lives, and the same goes for securing the remote operation of a satellite up in space.  

CubeSat deploying from the International Space Station 

The ORCASat team, comprised of astrophile students from UVic, built and supported the launch of a miniature satellite (CubeSat). This miniature satellite will be used as a reference light source seen by telescopes on Earth. With the successful launch of their satellite from the International Space Station in December 2022, the team has much to celebrate as they mark ORCASat’s first anniversary in orbit.  

Q: Tell us about your work with ORCASat?  

A: Since I already manage the cybersecurity and risk team, volunteering with UVic’s Engineering and Computer Science Department just made sense. Through one of the projects I’m involved with, ORCASat, I help with design consultation and review, cyber security advice, implementing and maintaining systems, and coordination of BCI equipment donations. Cybersecurity affects every single aspect of our daily lives, and when it comes to securing the remote operation of a satellite up in space, you can apply the same principles that we do to secure BCI’s technology systems. UVic, my alma mater, happens to be an amazing tech hub, so volunteering there and inspiring the next generation makes it even more meaningful.  

Q: How are you sparking change in our community?  

A: Working with engineering and computer science students is a great way for me to advise, engage with, and support up-and-coming tech professionals. Having the opportunity to be a mentor and give back to the tech community is very rewarding. Plus, it’s a great chance to build connections and, with the demand for cybersecurity and engineering talent through the roof, now is the best time to get into the field. I enjoy seeing the students achieve and surpass their goals while getting excited about a career in cybersecurity, computer science, and engineering. Initiatives like this are creating a pipeline of the next generation of cyber security professions. At BCI, I’ve had the opportunity to hire a co-op from the ORCASat team, which provided them with even more hands-on experience!  

My connection through volunteering has also led to other unique collaborations. For example, through UVic’s Faculty of Engineering and Computer Science, BCI has found a home for its outdated technology that otherwise would have ended up as recycled plastic. Instead of recycling hundreds of old monitors, BCI’s Technology and Innovation department donated the equipment to the faculty for repurposing and upgrading decades-old technology to improve student learning.  

ORCASat team receiving donated laptops and monitors from BCI at their UVic satellite control ground station 

Q: What advice do you have for those looking to get involved in their communities?  

A: What works for me is to reflect on your interests and passions, research local organizations or initiatives, and be proactive when an opportunity presents itself. I was lucky enough to use my network to find passionate groups looking for mentorship at ORCASat, which is close to home and right up my alley. I encourage others to put themselves out there and volunteer. You can have an out-of-this-world impact!  

If your passions line up with mine, UVic’s Faculty of Engineering and Computer Science is always looking to involve people with technical, project management, and business experience. Learn more at www.orcasat.ca 

BCI offers every employee 14 hours of paid volunteer time each year to make a difference where we live and work. We appreciate our many team members who are champions in our communities. They are part of how we foster a culture of caring and make a positive impact for all. 

Learn more about how we give back at BCI.ca/community 

Victoria, B.C. – British Columbia Investment Management Corporation (BCI) has received a score of 100 per cent from Global SWF in its latest Governance, Sustainability and Resilience (GSR) Scoreboard, a testament to our industry-leading practices and commitment to accountability and transparency.

“Amid an increasingly complex global investment landscape, strong governance and responsible investing practices have become imperative to deliver long-term, sustainable returns for our clients and their beneficiaries,” says Gordon J. Fyfe, BCI’s Chief Executive Officer and Chief Investment Officer.

“This recognition reflects more than two decades of dedication to excellence in achieving our mandate, and the commitment of our world-class team. We are proud to be among leading global investors and look forward to continuing to support best practices across the industry.”

The annual benchmark evaluates the public disclosures of the world’s 200 largest sovereign wealth and public pension funds, which manage approximately US$27.5 trillion on behalf of 80 countries. BCI was one of only five funds to achieve a perfect score, sharing the top spot with CDPQ (Canada) , ISIF (Ireland), NZ Super (New Zealand), and Temasek (Singapore). Last year, we achieved the second highest score with 96 per cent.

In September 2023, Global SWF highlighted BCI as its Fund of the Month with a focus on investment performance, global expansion, and leadership on environmental, social, and governance (ESG) matters.

Learn how BCI unlocks opportunities in volatile markets in our 2023-2024 Corporate Annual Report.

ABOUT BCI
British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada, with C$250.4 billion in gross assets under management as of March 31, 2024. Based in Victoria, British Columbia, with offices in Vancouver, New York, and London, U.K., BCI manages a portfolio of diversified public and private market investments on behalf of its 29 British Columbia public sector clients.

With a global outlook, BCI integrates ESG factors into investment decisions and activities that convert savings into productive capital to meet clients’ risk and return requirements over time. Founded in 1999, BCI is a statutory corporation created by the Public Sector Pension Plans Act. For more information, visit BCI.ca or LinkedIn.

CONTACT
Olga Petrycki
media@bci.ca

Prudent asset allocation and stringent liquidity management enabled BCI to perform well amidst ongoing market volatility.

As undercurrents roiled the global economy and capital markets in fiscal 2024, our BCI investment professionals again demonstrated their know-how and resolve by delivering positive returns across most asset classes. The strong showing was due in large part to our teams having already modeled this sort of macroeconomic scenario, buttressing our ability to manage downside risks and capitalize on strategic opportunities stemming from market dislocations. The adverse environment experienced over the past several years has further underscored the benefits of building a well-diversified portfolio focused on high-quality assets, while expanding sources of returns with regard to geographies, asset types and strategies — including private debt, a space BCI entered just five years ago.

A combination of prudent asset allocation and stringent liquidity management with regard to client portfolios enabled BCI to perform well amidst ongoing market volatility. Over the course of fiscal 2024, we added around six months to the liquidity coverage ratio, ending the year with approximately 19 months and still growing. Those robust reserves and sizeable stores of ‘dry powder’ further attest to our effective strategy and risk management frameworks.

Several noteworthy strategic initiatives, including the evolution of our Funding Program and the addition of unsecured debt, continue to be fundamental to strengthening BCI’s liquidity position. This past year saw the issuance of our inaugural debt offering — which was oversubscribed and, accordingly, re-opened just three months later — achieving a total raise of $2.25 billion. The program also received the highest possible long-term credit ratings from leading global agencies: Moody’s (Aaa), S&P (AAA), and DBRS Morningstar (AAA). Those stellar ratings speak to our exceptional investment and operational capabilities.

As regards debt, we have increased our private debt holdings from zero in 2019 to more than $15 billion. The strategy is performing well, and we have experienced no defaults in our internal portfolios. All credit to the team. The rapid growth of this program reflects an economic milieu that has created a challenging environment for borrowers — and interesting opportunities to address the alternative credit needs of non-sponsor, middle-market companies. So, in another first for BCI, we announced an anchor investment in a new venture between Centerbridge Partners and Wells Fargo that focuses on direct lending to North American mid-market companies. It stands to reason that infrastructure debt was also an important focus area for BCI this year as we sought to offer compelling risk-adjusted returns with lower volatility and high-yielding cash flow. This strategy has been in development since 2020, and we expanded our capital deployment in this space over the past year.

PERFORMANCE HIGHLIGHTS

Performance-wise, BCI found itself with a tough act to follow in the wake of the back-to-back, record-breaking value-add results we achieved in fiscal years 2022 and 2023. This year, we returned 7.5 per cent for our combined pension plan clients, compared to the benchmark result of 11.6 per cent. Nevertheless, we outperformed our benchmarks for the five-, 10-, 15- and 20-year periods. Crucially, we also exceeded the actuarial required rate of return our pension clients need to meet their future obligations over these long-term periods, enabling them to remain in surplus positions.

Closer scrutiny of our relative one-year performance confirms that we outperformed benchmarks for all asset classes except real estate equity and private equity, both of which faced difficult market environments. I wish to note as well that, current challenges notwithstanding, we remain confident in our rebalanced real estate portfolio, which mainly comprises warehouses, data centres, and multi-family housing. Over the past eight years, we have reduced our office weighting by nearly half to 19.1 per cent, holding mostly ‘Class A’ buildings with high occupancy rates. With respect to private equity, we should bear in mind that this asset class has been a star performer and was a major contributor to those record value-add results posted for the 2022 and 2023 fiscal years. However, macroeconomic factors impacting private equity markets have slowed deal flow dramatically over the past year and caused valuations to decline. Additionally, private equity is paired with an internal benchmark holding a public equity index which saw explosive growth driven by the so-called ‘Magnificent Seven¹’ tech stocks that collectively make up more than 25 per cent of the S&P 500 index. Suffice to say that, given the extenuating circumstances, we anticipated this year’s underperformance by BCI’s private equity holdings.

ESG LEADERSHIP

BCI remains firm in its commitment to manage risk and achieve long-term returns on behalf of our clients. We do this by using environmental, social, and governance (ESG) considerations as an integral part of our investment process. Two major ESG-related milestones were reached in fiscal 2024: surpassing the expected 30 per cent reduction in our public equities weighted average carbon intensity² (WACI); and exceeding the expected $5-billion cumulative participation in sustainable bonds.

Those milestones were achieved ahead of schedule, and I am proud of our team’s ongoing work to support the global goal of net zero and align our portfolio to a low-carbon future.

CLIENTS FIRST

Our organization continues to evolve along with the needs of our clients and their beneficiaries. Accordingly, our focus on innovation must extend beyond technology into all facets of BCI’s overarching operations, culture and values. Nevertheless, I wish to remind stakeholders that there is one constant: BCI’s tried-and-true corporate values, led by ‘Clients First’, remain the driving force behind our strategic planning and decision-making. BCI regularly conducts comprehensive client satisfaction surveys, and I am pleased to report that we attained an overall satisfaction score of 92 per cent in the 2023 calendar year assessment, up six per cent from 2022. Of course our commitment to client satisfaction is by no means limited to investment performance. Rather it’s a measure of our clients’ overall confidence and trust. So I should note that clients also expressed a high degree of approval in how we have supported them through protracted economic and market upheavals, and broader concerns stemming from ongoing geopolitical tensions.

TALENT MANAGEMENT AND DEVELOPMENT

Employee engagement and retention remain top priorities as we return to a more office-centred workplace model, and reinforce our focus on our shared values and collective culture. Teams now spend four days a week in the office to facilitate better communication, mentoring and collaboration. At the same time, we continue to advance our equity, diversity and inclusion (EDI) strategy and roll out our EDI action plan. This year we have provided employee diversity metrics for gender, race and ethnicity in our report, to underscore our commitment to advancing diversity within BCI and the investment industry at large, in alignment with the International Financial Reporting (IFRS) standards.

We also continue to be actively engaged in our campus recruitment program, aimed at forging lasting connections with post-secondary institutions and building a strong pipeline of diverse up-and-coming talent. New this past year is an Indigenous Empowerment Award Scholarship Program, established in partnership with Vancouver Island University. This program supports the development of young Indigenous investment professionals, two of whom were awarded scholarships this year.

ARTIFICIAL INTELLIGENCE: A POTENTIAL GAME CHANGER

I count myself among the growing legions of people who view artificial intelligence (AI) as arguably the most important technological development of our time, and a true game changer for those of us in the investment business — even as we grapple with the risks and benefits this emerging technology might pose. Across BCI, we are actively exploring the potential of various AI applications to improve the way we do things, evaluating tools that hold the promise for helping to drive innovation, streamline processes, boost productivity and unlock the potential for even greater value-add for clients. Furthermore, AI can provide opportunities to redirect precious human resources, freeing team members from monotonous tasks to take on more interesting challenges. Properly handled, I believe there is potential for everyone to emerge as a winner from AI.

COMPLIANCE MONITORING

On a related front, BCI has also launched a new automated compliance system for employee preclearance and disclosures, an imperative for organizations such as ours. Replacing manual processes for preclearing employee trades and monitoring employee compliance is crucial to ensuring we adhere to regulatory guidelines and execute these processes efficiently.

BUSINESS PLAN TRANSITION

This past fiscal year-end saw the completion of BCI’s three-year business plan. Accordingly, in collaboration with the Board of Directors, management spent time this year developing a new business plan to take effect in fiscal 2025. This new plan focuses on three underlying strategic ambitions: Driving Sustainable Growth, Accelerating Innovation, and Operating on a Global Scale.

OPERATING ON A GLOBAL SCALE

We are already well on the way to realizing that latter ambition: our New York and London offices have proven successful in numerous respects, facilitating the hiring and retention of world-class talent and bringing a global perspective that augments BCI’s access to investment opportunities and risk management. I should also note that our presence in Mumbai, India, has proven instrumental in opening doors for BCI on the subcontinent and in neighbouring ASEAN markets. Establishing offices abroad is not without logistical and cultural challenges. However, we are confident that any obstacles we encounter can be successfully overcome by drawing on BCI’s trademark ingenuity and teamwork.

MORE TWISTS AND TURNS AHEAD FOR GLOBAL MARKETS

Looking ahead, we anticipate ongoing near-term market volatility, which means our investment strategy & risk team will be kept busy modeling various scenarios and pathways. Given that inflation and interest rates remain high in certain key economies, we continue to closely monitor recession indicators as well as several worrisome geopolitical conflicts that pose a threat to global stability through the risk of contagion.

Be that as it may, we remain focused on clients’ long- term goals and regard the near-term volatility as both a challenge and an opportunity to support value creation in our investments. It’s all about continuing to find innovative solutions to deliver risk-adjusted returns for our clients’ portfolios, no matter the market conditions.

As I have previously observed, relationships are at the heart of what we do. Active investing is anchored in the quality and strength of the relationships between partners. BCI’s global growth brings us closer to where many of our partners and investment opportunities are to be found. At the same time, stakeholders can rest assured that we will remain grounded in our underlying purpose: providing world-class investment management services to British Columbia’s public sector.

On that note, I wish to acknowledge and thank our clients for the ongoing trust they place in us as their asset manager; the BCI Board of Directors for their diligence and engagement in our governance; as well as my colleagues in senior management and the entire BCI team for their unstinting efforts and commitment to the realization of our goals.

Gordon F. Fyfe
Chief Executive Officer/Chief Investment Officer

 
¹ The Magnificent Seven consists of U.S. technology stocks: Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).
² Calculated using the weighted average carbon intensity methodology.

BCI looks for opportunities to invest in the fast-growing market of sustainable bonds. These use-of-proceeds bonds — labelled green, social, or sustainability — offer clients investment returns and exposure to positive sustainability outcomes, including climate mitigation strategies. Through primary market participation, our investments support leading issuers in directing funds toward tangible environmental and social solutions.

Overachieving our estimated $5 billion cumulative participation by 2025, BCI’s total historical participation in sustainable bonds reached more than $5.23 billion as of March 31, 2024. We’ve supported a total of 63 issuing entities through 113 new issues since 2013 and invested in 21 new issuances valued at just over $1 billion in this fiscal year alone.

Anne-Marie Gagnon, Director of ESG, sits on the board of the Canadian Bond Investors’ Association (CBIA) and chairs the CBIA’s ESG Committee. BCI is also a member of the International Capital Market Association (ICMA) Green and Social Bond Principles, currently its only Canadian investor member. We promote the ICMA Green and Social Bond Principles to support market growth, encouraging qualified issuers to consider sustainable bonds as a financing mechanism within their sustainability strategies.

Engaging on Standards
Critical to improving the product offering for bond investors, we continue to engage underwriting banks and issuers to align with investors’ interests and expectations for improved transparency and rigour in accounting and reporting on sustainable finance targets. In addition, we actively support engagements and hold regular dialogue with market participants involved in the structuring and marketing of sustainable and labelled bonds.

BCI is a member of the ICMA Sustainability-Linked Bond (SLB) Working Group, and of the Sustainability-Linked Loans (SLL) Refinancing Instruments Taskforce. Sustainability-linked bonds and loans have general purpose use of proceeds with financial or structural components tied to achieving ESG targets. We disagree with the systematic characterization of sustainability-linked financing as sustainable finance by the underwriting community. BCI is a member of these efforts to ensure investors’ views are expressed and considered. We advocate to significantly strengthen the instruments’ shortcomings including the ambition of targets and the materiality of penalties associated with missed targets to deliver their intended purpose of incentivizing companies to achieve sustainability targets.

“Our engagement with bank dealers and issuing companies on sustainable bonds shows how the invest and influence pillars of our ESG strategy intersect. Influencing the behaviour of market participants gives us better options to invest in attractive opportunities, while actively investing gives us a stronger voice at the table.”
– Anne-Marie Gagnon, Director, ESG

Participation Across Issuers and Industries
BCI participates in the sustainable bond market by investing in a diverse universe of issuers, including sovereign, supranational and agency (SSA) issuers — such as all level of government organizations and development banks— and corporate investment grade and high-yield issuers.

Canadian-dollar-denominated SSA bonds represent over 40 per cent of our total historical participation, with issuances by development banks representing under 10 per cent, and Canadian governments and agencies such as Public Sector Entities reflecting over 30 per cent of total historical participation. Examples from our fiscal year, ending March 31, 2024, include:

• $450 million invested in green and social bonds from Canadian federal, provincial, and municipal governments.
• $100 million invested in social and sustainability bonds issued by development banks.

Canadian-dollar-denominated corporate issuances represent over 30 per cent of our historical participation. Examples from this fiscal year include:

• $125 million+ invested in Canadian utilities issuing green and sustainability bonds.
• $100 million+ invested in Canadian real estate and financial institutions issuing green and sustainability bonds.

U.S. corporate issuance represents over 25 per cent of our historical participation, including about 15 per cent from financial institutions and just under 10 per cent from industrials. This fiscal year, we observed reduced supply in the US market, especially from banks compared to previous years. Investment examples from this fiscal year include:

• $40 million+ invested in industrial companies’ green bonds.

Use of Proceeds

Historically, BCI has subscribed to 113 sustainable bonds, representing over $5.23 billion in initial participation in support of 63 issuing entities¹. Some examples of our 2023-2024 investments are included in the table below.

^{1At March 31, 2024}

Last updated October 22, 2024

As a long-term investor, BCI believes in engagement and advocacy over divestment in high-emitting sectors such as oil and gas. We prefer to address long-term and persistent ESG risks like climate change through constructive dialogue with company management and boards, as well as regulators and standard setters. This includes encouraging companies to adopt targets aligned to the Paris Agreement and improve climate-related disclosure and performance.

Aligned to our Climate Action Plan, BCI has increased our focus on methane emissions and use of strategic escalation where we see limited progress following engagement.

Increasing our Focus on Methane Disclosure
Methane has a far greater warming potential than carbon dioxide, contributing 28 times more on a 100-year timescale and 84 times more on a 20-year timescale, and the portion of emissions attributable to human activities is responsible for at least a quarter of today’s global warming. According to the International Energy Agency, addressing methane is one of the fastest, most cost-effective means of limiting global warming in the near term. This means companies are also facing heightened regulatory risk and pressure from consumers to act.

While natural gas is positioned to play a role in the energy transition over the short to medium term in certain jurisdictions, the accuracy of methane reporting remains a source of uncertainty and potential risk. Despite voluntary disclosures, methane is recognized to be significantly underreported because of insufficient detection and overly simplistic accounting assumptions. To make informed investment decisions and manage risk within the portfolio, long-term investors need companies to align to leading methodologies for methane disclosure and seek third-party verification through reasonable assurance.

Calling for Alignment with the Oil & Gas Methane Partnership 2.0
We encourage companies to align with the Oil & Gas Methane Partnership 2.0 (OGMP) – the flagship oil and gas reporting and mitigation program of the United Nations Environment Programme and the highest standard in methane measurement, reporting, and target setting. Its comprehensive framework allows investors to track and compare progress and performance across companies, and strengthens the effectiveness of abatement activities. This is particularly important as scrutiny on methane will increase as new technologies evolve such as satellites capable of detecting methane. Furthermore, enhanced measurement and management aids operational safety and efficiency such as monetizing a waste product that could otherwise add value to the oil and gas value chain.

The OGMP’s membership includes 130 companies with assets in more than 70 countries, representing nearly 40 per cent of the world’s oil and gas production, over 80 per cent of liquified natural gas flows, and nearly 25 per cent of global natural gas transmission and distribution pipelines. While the initiative has grown significantly in recent years to include many major U.S. oil and gas companies and global national oil companies, there is currently only one Canadian member company, emphasizing the need for further engagement.

“Commitment to and implementation of OGMP provides investors with assurance that portfolio companies are responsibly managing and urgently mitigating their methane emissions towards near-zero levels.”
– Anne-Marie Gagnon, Director, ESG at BCI.

To enhance our efforts, BCI joined a collaborative engagement led by Nordea Asset Management to urge more oil and gas and utilities companies to join the OGMP and reduce methane emissions to near-zero levels. In 2023, nine of its focus companies joined the OGMP and the initiative received the Environmental Finance Award for Pollution Reduction Initiative of The Year (Global). The collaborative engagement also recently received the 2024 Recognition for Action – Climate Award from the Principles for Responsible Investment for its leadership on methane reduction and disclosure.

Case Study: TC Energy
BCI has been engaging individually with TC Energy, a Canadian energy infrastructure and pipeline company, on strengthening its methane disclosure.

After almost two years, we escalated our engagement by filing a shareholder proposal seeking reasonable assurance on TC Energy’s climate-related emissions metrics, including methane in its natural gas business unit, ahead of the company’s 2024 annual shareholder meeting. We also requested that TC Energy adopt the OGMP’s methodology for measurement and reporting as a basis for reasonable assurance on the methane metrics.

In response to our engagement and filing, TC Energy committed to publish a roadmap to reasonable assurance and reassess its membership in the OGMP by July 2025. Based on this progress, we agreed to withdraw the proposal prior to the annual meeting. BCI will continue our engagement with the company as it delivers on these commitments.

Contributing to a Stronger Regulatory and Policy Environment
As a global investor, BCI actively responds to public policy consultations and advocates for ambitious action to address oil and gas methane emissions at the regulatory level. For example:

• In 2021, BCI joined major global investors in signing an investor statement calling for stronger regulations and enforcement for methane emissions in the U.S.
• In 2023 and 2024 respectively, we responded to regulatory consultations on methane held by the U.S. Environmental Protection Agency and Environment and Climate Change Canada (ECCC).

Overall, BCI supports the proposed regulations and ECCC’s efforts to adopt cost-effective rules for its methane reduction target of at least 75 per cent by 2030. We also support extending the regulations for the exploration and production sub-industry to storage, processing, transportation and transmission facilities in Canada’s onshore oil and gas sector.

Learn more about our approach to climate action.

Examining investments at the total portfolio and client portfolio levels allows us to identify broad ESG trends that could have financial or reputational impacts.

We use our proprietary ESG Risk and Opportunity Framework to analyze, measure, and report on ESG opportunities and risks across portfolios, including climate change scenarios. This work helps us make more informed decisions and supports resilient portfolios focused on the long term. It also increases the likelihood of achieving our clients’ financial objectives.

We developed the framework over a number of years, and continuously improve it by updating financial models, estimation methods, and methodologies.

The Framework
BCI’s ESG Risk and Opportunity Framework is designed to support analysis at a total fund, client, asset class, portfolio, sub-industry, and individual asset levels. It consists of five modules:

• Materiality: identifying relevant material systemic risks for the total portfolio.
• Scenarios: developing and updating scenarios for each material systemic risk.
• Sensitivity tool: quantifying the financial impact of systemic risks on every sub-industry.
• Risk quantification: quantifying the potential financial risk impacts to the portfolio over time.
• Dashboards: reporting and distributing data and results for each investment decision.

By testing the sensitivity of industries and portfolio holdings, BCI can identify, evaluate, and target areas of opportunity and risk.

Climate Scenarios
The framework’s climate scenario analysis and modelling capabilities allow BCI to evaluate multiple possible future outcomes using standard financial and risk modelling techniques and approaches. The scenarios are updated and refined as new data and estimation methodologies from reputable sources become available, such as the International Energy Agency (IEA) and the Network for Greening the Financial System (NGFS).

We analyze historic and current asset exposures using long-term expected climate change impacts under different climate scenarios, including 1.5°C, 2°C, and 3°C. The framework is used to stress test total portfolio and asset-specific impacts under these scenarios.

Using the Results
We use the framework for client asset-liability reviews and to analyze material transition and physical climate risk during deal due diligence reviews. For clients, the framework shows the vulnerabilities of different strategic asset allocations. For due diligence on potential new investments, where material, BCI evaluates transition and physical climate risks and opportunities. This allows BCI to identify risks, potential risk mitigation strategies, or identify new opportunities at the investment, asset class, and total portfolio levels. For asset classes and portfolio managers, this analysis provides a better understanding of the resiliency of certain types of investments to climate change and other uncertainties.

Between 2018 and 2020, asset allocation decisions, informed by climate change scenario analysis, decreased the climate risk level for the portfolio and increased the potential for transition opportunities. Climate risk in the portfolio has remained relatively stable since 2020, and we expect the actions in our Climate Action Plan will continue to reduce this risk level going forward.

Our ESG team continues to monitor emerging trends like societal and labour risks, biodiversity risks, and increasing cyber security risks that have potential implications for our global portfolio.

^{1The results represent the measurement of the portfolio climate risk that could materialize by 2050 under a 2°C scenario relative to a 3°C scenario. The 2023 results are not directly comparable to prior years due to incorporation of new datasets from the NGFS and extending the analysis date from 2040 to 2050. Using the prior year reported data and approach, portfolio climate risk levels in 2023 were roughly unchanged relative to 2022 risk levels.}

BCI’s private equity program manages a diverse portfolio comprising $30.7 billion in directs, co-investments, and funds. By actively engaging with our portfolio companies to identify material ESG risks and opportunities that drive economic value, we can achieve tangible outcomes that have the potential to result in higher risk-adjusted returns for our clients as our portfolio companies become more resilient, sustainable, and better positioned in their respective markets.

Evan Greenfield, Managing Director, ESG, shares how BCI’s private equity team actively creates value for our clients through ESG performance improvements.

BCI leverages ESG as a source of value creation across our portfolio. How is this accomplished in the private equity program?
EG: Our embedded ESG experts work closely with the private equity investment teams to integrate ESG considerations across the investment timeline, from due diligence to exit. We tailor our approach for each portfolio company and aim to identify and address material risks, unlock new growth opportunities, and improve operational efficiency.

We have developed an engagement-based ESG framework unique to private equity that helps us to create clear links between initiatives and quantify financial outcomes. It is designed to understand company-specific risk factors and opportunities, inform strategy, and create economic value during three main phases:

1. Investment Due Diligence: At the outset, BCI evaluates material ESG risks based on the company’s industry and identifies mitigation pathways such as purchase price adjustments or post-investment reduction strategies. Value creation opportunities are also identified at this stage but the primary focus is on understanding ESG risk.
2. Post-Investment Close: While always working to identify and mitigate ESG risks, early in the investment period BCI looks to leverage ESG as a core part of company strategy. In some cases, this includes engaging with management to create products and solutions related to sustainability and the energy transition.
3. Investment Exit: Over the life of the investment, BCI supports our portfolio companies in demonstrating and sharing the tangible outcomes and value created by their ESG initiatives and tying this to financial outcomes. By leveraging ESG as a differentiation factor and competitive advantage, BCI aims to achieve higher exit valuations for portfolio companies.

Can you share a recent example of BCI’s work with portfolio companies?
EG: We engaged extensively with five portfolio companies, representing $1.6 billion in net asset value, over the past year to establish and quantify ESG-related initiatives. Through this work, we have identified numerous opportunities for value creation, and are working to execute on ESG related initiatives that we believe can unlock hundreds of millions in value for our portfolio.

One example is our engagement with PS Logistics, a leading flatbed truck transportation and logistics provider in the U.S. Collaborating with management, we quantified the financial benefit attributable to their ’driver-first’ culture. Management’s focus on prioritizing drivers has led to distinct financial benefits such as reduced insurance premium costs, avoidance of costs in recruiting and training new drivers, lower energy costs through route optimization, and greater market share from clients who are focused on sustainability in their supply chain.

Does the private equity team’s ESG approach extend to our general partners?
EG: Over the past year, we engaged more than 50 per cent of our fund portfolio general partners, based on assets under management, on ESG and climate-related opportunities to align expectations, exchange expertise, and enhance performance. This included conducting deep-dive educational sessions to showcase leading practices in ESG integration.

We also encourage our general partners to participate in the ESG Data Convergence Initiative (EDCI) – a global initiative that compiles private company ESG data using a standard set of metrics established by investors.