Responsible Investing Update 2019
November 25, 2019

At UBC IMANT, we implement responsible investing principles by assessing environmental, social, and governance (ESG) considerations used by our selected investment managers. We seek evidence that our investment managers incorporate these factors when managing their portfolios. Moreover, we believe that an integral part of responsible investing is engagement with investment managers, companies or industries to advance best practices.

2019 Highlights

  • Review of ESG considerations by IMANT’s private asset managers showed significant adoption of responsible investment principles
  • UBC increased its commitment to the Sustainable Future Endowment Pool
  • Collaborative engagement with regulators on matter of gender diversity, climate risk disclosure, executive compensation and shareholder rights
  • Manager engagement regarding improvements in ESG transparency and implementation
  • IMANT achieved nearly universal disclosure of CO2 emissions from public equity managers

Key Indicators & Initiatives

  • 100% of IMANT’s public asset managers are signatories to UN Principles for Responsible Investment
  • 74% of IMANT’s private asset managers incorporate ESG in their investment decisions

Responsible Investing at IMANT

This is IMANT’s fifth year of implementing a formalized approach to responsible investing. We view ESG considerations as part of our fiduciary duty to better understand all the risks that our investment portfolios are exposed to.

The University’s Responsible Investment (RI) Policy commits UBC and IMANT to incorporate ESG principles into its endowment investments through four main avenues:

  • Manager selection – When selecting and evaluating investment managers, UBC commits to integrate ESG factors.
  • Investor engagement – Wherever possible, UBC will encourage its fund managers to use their proxy votes to encourage transparency on ESG policies, procedures and other activities.
  • Direct engagement – Where IMANT is significantly exposed to a company, industry, or nation that is facing a considerable ESG issue, UBC will encourage their investment managers to engage directly through available channels.
  • Collective engagement – UBC and IMANT will engage issuers, regulators, and industry groups when it is believed that a collective approach to engagement will be more effective than direct engagement in addressing an issue.

Over those five years, we have expanded our ESG focus beyond public markets and are very pleased by the rate of adoption of responsible investing principles across non-public asset classes.

IMANT’s public equity managers have twice been independently evaluated with respect to the degree of ESG adoption to establish a baseline and to monitor progress over time. Those reviews confirmed IMANT’s internal assessment of our managers and have also served as a basis to engage with managers to mitigate any identified gaps in their respective ESG implementations.

IMANT’s ongoing investment in ESG data and tools and developing in-house expertise has benefited us and we are viewed as supportive partners in ESG implementation. We have engaged with many investment managers to either provide advice or exchange ideas on best practices in responsible investing.

Fiscal 2018/19 was a successful year for the UBC Sustainable Future Pool (SFP). The SFP enjoyed strong investment returns, and its portfolio was estimated to have CO2 emissions that were 80% lower than the standard benchmark. These results make this Pool an attractive option for endowment donors. Additionally, UBC demonstrated its strong, ongoing support to responsible investing by increasing its investment in the Pool to $50 million.

Public Markets

We are pleased to report that as of the end of fiscal 2018/19 IMANT has achieved nearly universal CO2 emissions transparency from public equity managers. This compares favorably to IMANT’s first carbon footprint estimate in 2015/16 when, as early adopters of climate data transparency we had to obtain the relevant data ourselves. Through this work we have gained valuable insights on CO2 emissions data quality and coverage. Looking ahead, we will continue to work with our investment partners to harmonize reporting to better understand IMANT’s carbon exposure across the portfolios we manage.

Over the course of fiscal 2018/19, IMANT’s public equity managers were actively engaging with companies on a variety of ESG related issues. In Canada, these issues ranged from requiring companies to establish explicit policies with respect to unionization and collective bargaining to ensuring board and executive gender diversity.

Internationally, IMANT’s insistence on responsible investing and risk transparency was reflected in a manager working to support the Task Force on Climate-Related Financial Disclosures (TCFD) to enhance disclosure of climate related risks. Particular attention was given to climate-related disclosure in the agricultural and forestry sectors.

Investing in emerging markets brings unique challenges to ESG investing. Lack of reporting standards, low reporting compliance and considerable gaps in the data from ESG data vendors make ESG implementation and monitoring challenging. IMANT’s manager selection approach has helped us to identify managers who stand out in this regard. While in the past most ESG concerns were left unanswered, our managers are improving their rate of success in their engagement with corporations.

Private Markets

Having accomplished considerable progress in advancing ESG implementation in public equities, in 2019 we expanded our efforts to include fixed income and private assets such as real estate, infrastructure and private equity.

As part of this work, we carried out a review of the level of adoption of responsible investing principles among private assets managers. This analysis has created a baseline for future evaluations, and we will use it to guide our next steps in improving ESG implementation within these asset classes.

IMANT’s manager engagement and selection process has resulted in nearly three quarters of our selected private asset managers incorporating ESG in their investment decision making.

Meanwhile ESG transparency for private asset investing is on course to reach the level of ESG reporting by public equity managers.  As of fiscal 2018/19, two-thirds of IMANT’s private asset managers provide responsible investing status updates.

IMANT’s Real Estate managers focus on environmental issues such as energy savings, reduced water use and improved waste management.  In other instances, our managers have invested in buildings that use leading technologies to achieve zero CO2 emissions from operations.

At IMANT, we believe that investing in infrastructure is rich with opportunities for ESG implementation.  Through our external managers we invest in fossil fuel free power generation ranging from solar and wind power generation through to biomass energy and hydro power.  Another focus of IMANT’s responsible investing is investments in social infrastructure such as courts, hospitals and public transit.  As transportation infrastructure is a considerable portion of our portfolios, we engage with our managers in taking steps to reduce rates of accidents, focus on road safety and efficiency improvements in rail transport.