How can shareholder engagement drive company behaviour?

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As shareholders, we can influence the practices of the companies in which we invest. One of our most important responsibilities is to use our voice to shape how companies achieve their long-term objectives and improve their ESG performance.

We take a combined approach to responsible investing: we select strong financial performers that are best-in-class for ESG factors, as well as those making substantial progress in meeting their ESG goals. Both the selection process and our level of shareholder engagement are informed by ESG analysis. We work with companies that integrate the right practices and that we believe can become even better with our involvement.

Desjardins has a dedicated team for each sector in which we invest. These teams define material ESG issues to analyze and then add specific priorities for companies to focus on, such as climate change or gender parity. These issues and priorities are included in our shareholder engagement strategies.

How do we make an impact as investors? By employing the three strategies below.

Exercise voting rights

One prime opportunity to make a difference is at the annual shareholder meetings of the companies held in Desjardins investment funds and portfolios. We are proud to exercise our voting rights and consider it our duty to take a stand on the proposals submitted. We vote in line with our values and those of our partners and clients.

One of our values is gender diversity: is there female representation on the board of directors? In keeping with our policy on proxy voting rights, we voted against the chairs of the nominating committees and boards of directors on 291 occasions because they had fewer than two women on the board and no female candidates.

Proxy voting can also pave the way for productive conversations on other issues. For example, after we voted against a specific CEO compensation plan, the company reached out to us for more insight. Acting on the recommendations of Desjardins and other investors, the company eventually made several changes to its compensation structure, bringing it in line with industry best practices.

Start a dialogue

Another way to drive change is through shareholder dialogue. By helping companies approach issues proactively, we can improve their risk management practices and avoid vote battles before they occur.

Dialogue happens on multiple fronts. Our RI team and portfolio managers meet jointly with a corporation’s senior management or board. We also engage with the sustainable development teams of the companies we invest in, which allows us to home in on specific ESG practices.

This is an innovative approach that allows us to speak to leadership directly on the issues that can affect their company’s value. Seeing the RI, equity and fixed income teams together sends a powerful message. It shows that we’re speaking with one voice and are ready to explain the positive correlation between ESG practices and broader results.

Our approach leads to constructive outcomes. Academic research on corporate social responsibility shows that shareholder dialogues can result in improved governance and financial performance. Our own experience shows that companies often follow up with our teams as they implement their ESG strategies.

For example, after our discussions with the C-suite from a REIT, the firm subsequently demonstrated its commitment to ESG integration by hiring a VP of Sustainability and publishing its first ESG report. That’s progress.

Engage with public decision-makers

Lastly, we participate in discussions with public decision-makers, including regulators and legislative authorities, advocating for better ESG disclosure and integration requirements. It’s yet another tool we can use to encourage the companies in our portfolios to improve their ESG practices and to integrate them fully into their operations.

Shareholder engagement is rapidly becoming an effective way to help companies have a positive impact on society and the environment, all while optimizing their returns. That’s what RI is all about.

Solène Hanquier