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Stewardship

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 is built on 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 achieves 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:

  • Sustainability disclosures

  • Board competencies and compensation

  • Climate action (including energy efficiency)

  • Diversity, equity and inclusion

  • Human rights

  • Population health

  • Air and water pollution

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 for investee stewardship differ by asset class, but may include:

  • 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, and
  • 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 we believe are key to influencing real change:

Engagement

This refers to the process of investors engaging with the management and directors of a company to express their views and concerns, and to influence the company’s policies and practices. 

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.”2

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.”3

We believe that that these are the most influential ways to exhibit active stewardship. Voting activity, including participating in shareholder proposals, is an important lever of influence for shareholders and signals investor expectations to company leaders. Shareholder engagement can lead to deeper insights, reflection, and action – and provide mutually beneficial learning opportunities for both company leaders and shareholders.

Our approach to stewardship

Sun Life Global Investments offers investment solutions that are managed by third-party investment managers so we do not perform individual security selection. This means we do not have direct responsibility for voting and stewardship activities at the company level—these are delegated to the investment managers for each of our investment solutions. We do, however, believe we have an important stewardship role to play in the industry and with the investment managers we work with. This means we must:

a) Assess investment managers: develop and maintain a deep understanding of the stewardship activities of our investment managers.

b) Engage and influence: use our findings to identify where we can engage with our investment managers and influence their stewardship activities.  

Assessment

We conduct our assessments throughout the investment manager selection process and ongoing journey with us: 

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 voting responses and progress.

Populate our internal heatmap to identify weaknesses and areas to engage on.

Ask deeper questions on specific topics raised in the industry, our research or results of our questionnaires/ heatmap.

We assess investment managers in several areas including:

  • Philosophy
  • Policy and frameworks
  • Team and resources
  • Feedback loop
  • Focus areas
  • Systemic mindset
  • Alignment to sustainable development goals (SDGs)
  • Tracking and reporting of stewardship activities
  • Collaboration efforts.

Engagement and influence

We analyze the results of each assessment activity to determine where each investment manager 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 will focus on:

  1. climate change,
  2. human capital management and human rights (including population health), and
  3. governance practices.

We aim to review our investment managers’ stewardship efforts on shareholder resolutions or votes from time to time. Queries can revolve around:

  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 flagged by Climate Action 100+ on key votes 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.

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 https://www.unpri.org/stewardship/voting/6269.article

3 https://www.unpri.org/filing-shareholder-proposals/a-guide-to-filing-impactful-shareholder-resolutions/10995.article