BCI adopting more stringent ESG expectations

The British Columbia Investment Management Corp. is raising its environmental, social and governance-related expectations for the publicly-traded companies it invests in.

Under its new proxy-voting guidelines, updated every two years, the BCI made several significant changes in relation to diversity and inclusion, climate change and executive compensation. Specifically, the BCI now expects that women will comprise at least 30 per cent of a company’s board of directors.

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“Boards and executive management have an important role to play in promoting and fostering diversity and inclusion,” said Jennifer Coulson, vice-president of ESG and public markets at the BCI, in a press release. “We expect boards to adopt and disclose a formal diversity policy that includes targets and timelines to increase levels of diversity at the board and senior management level.”

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Also, the pension fund now considers more-prescriptive shareholder proposals on climate change to publicly signal its expectation that companies must act immediately. It will also escalate the targeting of directors for “weak responses to climate-change risk.”

Indeed, the BCI “will consider supporting more prescriptive proposals, including those asking companies to align emission reduction targets with best practices such as net-zero by 2050,” said Coulson.

And the pension fund will now escalate votes against company directors for poor compensation practices as part of a more holistic review of remuneration to address the impact of the coronavirus pandemic. “While we’ve seen progress in compensation-plan design, we remain concerned that total pay continues to increase rapidly, especially in the U.S. market,” she said.“COVID-19 presents additional concerns about employee safety, layoffs and capital allocation decisions relating to dividends and share buybacks.”

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