Voice over exit. That’s the succinct phrase Alberta Investment Management Corporation (AIMCo) uses to describe its philosophy on sustainable investing, preferring to engage with companies, rather than divesting.
AIMCo manages $90 billion as the province’s arms-length investment manager for 27 clients, a mix of DB and public sector pension plans, said chief client relations and legal officer Darren Baccus, speaking last week at the Responsible Investment Association’s annual conference in Banff, Alberta.
“We feel it is incumbent on us to maintain as broad as possible an investment universe for our clients,” he said in a panel discussion. “There are reams of examples of other engagement scenarios where it’s quite conceivable other organizations would have said ‘That’s enough, we are going to exit from this position for the following reasons.’ At AIMCo, we seldom find ourselves in that position. In fact we often see those opportunities as areas to add value.”
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“We don’t believe that our core mandate, which is generating investment returns, is at all at odds with ESG integration. In fact, we think they are supportive of each other,” Baccus added.
At AIMCo, responsible investment (RI) falls within the legal department, noted Alison Schneider, AIMCo’s manager of responsible investment. “We really like that because it’s an overarching department and while some of our peers tend to park RI in public equities, they are more focused on proxy voting and engagement with publicly traded companies. The other asset classes are left to take care of themselves.”
“At AIMCo, it’s more of a holistic approach across all assets under management. We’re doing proactive things on the private side, so real estate has their own sustainability guidelines and infrastructure has their own sustainability guidelines.”
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Case Study: Rana Plaza
One of the most challenging assignments AIMCo has faced in recent years has been the fallout from the Rana Plaza tragedy in Bangladesh in April 2013, when 1,100 textile workers were killed and 2,500 injured in a factory collapse. In fact, Bangladesh has been one of AIMCo’s focused engagement items over the last 18 months.
Schneider says one of the fund’s focus areas on the social side is worker safety, workers’ rights and the supply chain. “When the Rana collapse happened, we had to figure out which companies we were invested in that might have supply chain risk in Bangladesh.” It wasn’t easy. AIMCo ended up engaging with 40 non-governmental organizations (NGOs) over a two-year period, before ultimately creating a list of affected companies. Of course, Loblaw, whose Joe Fresh clothing products were made at the factory, was on that list.
“We were absolutely impressed by what Loblaw is doing,” Schneider said. “They offered compensation to every family impacted by the collapse, whether or not the family members worked in the textile factory for their clothing line. They could have been working in the tire company a few doors over. Loblaw has been exhibiting absolute best practices.” Despite that goodwill effort, Loblaw has been targeted with a class-action lawsuit.
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Schneider said AIMCo has learned a lot from this engagement, since at the beginning of the process, they didn’t even know which questions to ask.
“Due to globalization, our supply chains go across countries that we have no jurisdiction over. At the time of the collapse, some of the companies had no look-through on their supply chain. I talked to Children’s Place and they had no idea where their clothes were being made,” he said. “Now they do. What we’ve noticed is that many of the companies have changed their supply chain protocols, not just for Bangladesh, but with the whole of Asia, and globally. So it’s getting much better.”
“Despite the terrible collapse and 1,100 people losing their lives, I do think we are making progress,” said Schneider. “And the companies we are invested in, we have confidence they are improving their protocols.”
Doug Watt is an Ottawa-based writer and editor.