Responsible investing: the power of stewardship
We have a responsibility to our clients to act with integrity, in good faith and in their best interests at all times. This forms the cornerstone of all our investment activities and supports our responsible investing initiatives and efforts. Our responsible investing approach involves how we assess and engage with our subadvisors across three key pillars: firm-wide commitment, strategy implementation, and active stewardship. The goal of this piece is to expand on our approach to active stewardship.
We believe that constructive and proactive stewardship can achieve two key objectives: (1) it is one of the most effective ways to influence companies to adopt more sustainable practices and (2) over time it can contribute towards preserving long-term wealth.
There are many areas where we believe stewardship is important including:
An opportunity to influence
The Principles for Responsible (“PRI”) defines stewardship as “the use of investor rights and influence to protect and enhance overall long-term value for clients and beneficiaries, including the common economic, social and environmental assets on which their interests depend.”1
Tools and activities available for investee stewardship differ by Investment Manager and asset class, but may include2:
- Engagement with investees (both current and potential)
- Voting at shareholder meetings
- Filing, co-filing, or submitting shareholder resolutions or proposals
- Nominations of directors to a company’s Board
- Leveraging roles on a company’s Board or on-Board committees
- Direct oversight of portfolio companies or assets
- Litigation
Tools and activities for broader stewardship can include:
- Policy engagement
- Engagement with standard setters
- Engagement with industry groups
- Negotiation with and monitoring of the stewardship actions of intermediaries in the investment chain, e.g. asset owners engaging external managers, limited partners engaging general partners
- Engagement with other stakeholders, e.g. NGOs, workers, communities, and other rights-holders and,
- Contributions to public goods (e.g. publicly available research) or to public discourse (e.g. through the media) that supports stewardship goals.
Generally, there are three actions that may potentially impact a company’s business operations and improve transparency in sustainability – related disclosures.
Engagement
This refers to the process of entering into constructive discussions with the company’s management and/or directors to exchange perspectives and potentially address concerns. We believe that fostering open discussions and seeking to enhance transparency lies in the best long-term interests of investors.
Shareholder Voting
For equity investors, engagement is generally supplemented by voting activity, including management and shareholder resolutions. PRI states that “voting on agenda items at annual general meetings (AGMs) is one of the most significant opportunities many investors have for influence.”3
Shareholder Proposals
PRI also states that “shareholder proposals are an important corporate engagement mechanism. They allow investors to use their formal rights as owners to publicly and transparently escalate important matters, and directly interact with a company’s board.”4
Our approach to stewardship
Sun Life Global Investments provides investment solutions managed by third-party investment sub-advisors, meaning we do not handle individual security selection. Consequently, voting and stewardship activities at the company level are the responsibility of these sub-advisors. However, we recognize our significant stewardship role within the industry and with our selected sub-advisors. This means we strive to:
a) Assess investment managers: Develop and maintain a good sense of the stewardship activities of our investment managers.
b) Engage and influence: Leverage our findings to identify opportunities for engaging with our subadvisors and potentially seek to enhance their stewardship practices.
Assessment
We conduct assessments during the sub-advisor selection process and throughout our ongoing relationship with them:
Request For Proposal (RFP) |
Finalist Meetings | Annual Due Diligence Questionnaire | Heatmap | Thematic Probes |
|---|---|---|---|---|
Include questions on proxy voting and engagement. |
Assess investment managers on three ESG pillars: firm commitment, strategy implementation and active stewardship. |
Track developments, including those related to stewardship. |
Populate our internal heatmap to identify weaknesses and areas to engage on. |
Ask deeper questions on specific topics, often including stewardship-oriented aspects. |
We assess investment managers in several areas including:
- Philosophy
- Policy and guidelines
- Team and resources
- Feedback loop (interactions amongst teams)
- Focus areas
- Tracking and reporting of stewardship activities
Engagement and influence
We analyze the results of each assessment activity to determine where each sub-advisor stands on the issues and themes that are important to us. When a gap or misalignment is identified, we may deepen our inquiries or engage further with them.
Our priorities
Looking ahead, Sun Life Global Investments intends to focus on:
- Climate change,
- Human Capital Management and human rights (including population health), and
- Governance practices.
We aim to review our sub-advisors’ stewardship efforts on shareholder resolutions or votes from time to time. Queries can revolve around:
| Area | Climate, human rights & governance | Involvement with influential companies | Environmentally influential |
Socially influential | Emerging issues |
|---|---|---|---|---|---|
| Example | Engage with our investment managers on votes that address inadequate disclosures or actions. |
Resolutions on companies that can meaningfully impact the global landscape on systemic issues, particularly climate. |
Resolutions that deal with corporate lobbying, |
Votes that concern racial audits or other human capital disclosures. |
Resolutions that address systemic issues in nature such as plastics, biodiversity, palm oil, deforestation, etc. |
Summary
Active stewardship is an important part of how we fulfill our responsibility to act in the best interests of our clients. It is a key part of our broader responsible investment commitment and overall journey, and we will continue to evolve our approach as we move forward.
1 https://www.unpri.org/stewardship/about-stewardship/6268.article
2 The Tools and Activities outlines are reflective of broader industry practices and may not apply to all subadvisors. They serve as general examples and are not indicative of every subadvisor’s approach
3https://www.unpri.org/stewardship/voting/6269.article
4https://www.unpri.org/filing-shareholder-proposals/a-guide-to-filing-impactful-shareholder-resolutions/10995.article
All investment solutions are offered as segregated funds for group retirement plans exclusively by Sun Life Assurance Company of Canada, through Sun Life Group Retirement Services, a member of the Sun Life group of companies.
Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada, and Sun Life Financial Trust Inc.
SLGI Asset Management Inc. is the investment manager of the Sun Life Mutual Funds.
© SLGI Asset Management Inc. and its licensors, 2024. SLGI Asset Management Inc. is a member of the Sun Life group of companies. All rights reserved.