In advance of our 2021 Challenge of Change Forum, we spoke to Jennifer Coulson, Vice-president, ESG and Public Markets. Jennifer will be joining a panel addressing the challenges and opportunities that come with implementing ESG strategies for pension funds. We talked about BCI’s ESG strategy and the four “I”s driving their decision making.
CLC: Last summer BCI launched its new ESG strategy — how does your new approach differ from what you’ve always done?
Jennifer Coulson: There were definitely a lot of pieces that were already underway, but this strategy was the first time we really brought everything under a corporate-wide umbrella. The way BCI’s investment strategy has evolved and developed, the asset classes have been pretty distinct in terms of how they’ve approached ESG. So, we felt the need to kind of come together as an organization and think about how we can bring some consistency to the overall framework — with flexibility for the different levels that we have in the different asset classes. The strategy put it all together under that corporate-wide lens and helped us make sure we had some consistency to the overall guidance.
CLC: What does your strategy look like?
JC: There are four pillars to it — four “I’s”. The first is integrate. Obviously we want to integrate ESG into everything that we do at all the different levels, whether it’s within asset allocation or individual security selection.
The second is influence which is largely what we were doing for the last 10-plus years, but now bringing that consistency across the asset classes to make sure that we are delivering a consistent message in terms of our expectations about the way we engage with companies and the way we engage with regulators, as well as using the overall influence that we have in the market.
The third one is pretty new — the invest pillar. This represented a bit of an evolution, moving from ESG as pure risk management to really looking at it in a way to capture the upside. How do we get some opportunities from our ESG work? This has involved an evolution, moving away from just using ESG to manage risks — which we’re still going to do. But with all of the shifts in the market, we were realizing that there is actually an opportunity as well. We wanted to be explicit about the fact that we’re going to seek those opportunities and make sure that we’re factoring that into our thinking.
Then the fourth “I” is the insight pillar and this was really necessary I would say, for BCI, because we’ve grown so fast. When I first joined, there were about a hundred employees and we’re now well over 500. With the evolution of the strategy and more people, we really felt the need to be explicit about the fact that we have to be sharing insights across the organization as well. We want to make sure we’re fostering that culture of ESG — that’s what the insight pillar is all about, to make sure that we are working across the asset classes, across the organization to share those insights. But also, developing that culture and making ESG part of the conversation.
CLC: How do you approach performance measurement — are there specific metrics you’re looking for?
JC: I think it’s always a mix of qualitative and quantitative factors, because on the qualitative side, you need policies and processes to make sure that things are implemented. However, we always need to show the outcomes too — to show this is actually adding value which is really important to our client base. There are pieces of measurement attached to each of the pillars, but to be fair, I think it’s a constant evolution. We’re always building that out to make sure that we are capturing what we want to capture.
For example, we measure all of the companies that we engage with over the year. We’ve also developed a set of key performance indicators related to that engagement so that it’s not just about a number of companies, it is about the outcomes that engagement is leading to. We’re quite public about this and you can see it within our Annual Report and how we report out on it.
But if you take gender diversity as an example, we can say we’ve met with, say, 50 companies — but has the practice actually changed in those companies and how many of them adopted policies? How many of them adopted targets? How many of them actually changed the composition of their board? We’re trying to get at more of an outcomes-based measurement. We’ve developed a pretty good set on the public market side. It’s a little bit trickier on private assets, to be fair, because a lot of that activity happens at the board level and we’re just trying to capture it all.
CLC: One of the top ESG challenges I always hear from asset owners is around implementation. How challenging has it been to implement this strategy? What have you learned along the way?
JC: There’s no silver bullet with many of these things. But it is one of the reasons that we wanted to build the culture piece into our strategy because it’s the same in the corporate environment — culture eats strategy for breakfast. If you don’t have the right culture, then the greatest strategy in the world is just not going to be picked up and executed on. We wanted to build that into the strategy and I would say that’s a really big factor.
I’ve had this role at BCI for nine years and before that I was in more of a retail mutual fund environment. I see the differences in culture for sure, but mostly on the institutional investing side. I’ve realized how much you need to make sure that you are adding value to the investment process. I think that’s what we’re careful to focus on as well. Because if you’re not adding value, then people will just see ESG as another hurdle to kind of get over as opposed to embracing it and understanding how it can add or detract value from the investments that you’re making. We try to really focus on what really adds value.