Responsible Investment Policy - Fonds Desjardins
ResponsibleInvestment PolicyDesjardins FundsMay 2022
DESJARDINS:More than 30 years ofexperience in responsibleinvestmentPage 1Responsible investment (RI), also known as “sustainableinvestment” or “socially responsible investment”, consistsof incorporating environmental, social and governance(ESG) factors into the selection and managementof investments.More than 30 years of experience inresponsible investmentPage 2Our responsible investment practicesDesjardins is a responsible investment pioneer. In 1990,it launched the Desjardins Environment Fund, one ofthe first of its kind in Canada. ESG factors Our beliefs when it comesto investment managementBack then, taking extra-financial criteria intoconsideration was a significant challenge to investmentmanagement practices. But the innovative approachfavoured by Desjardins was in complete harmony withits mission and values—that of contributing to theeconomic and social well-being of individualsand communities. Our responsibilities as a fund manager Selecting portfolio managers Our commitmentsPage 4Implementation strategiesWhile almost unheard of in the early ’90s, ESG-basedinvestment management is now experiencing stronggrowth across the globe. For example, more than 60%1of assets in Canada are managed using this approach. Objective and application of the RI Policy Selection process Issuer monitoringTrue to its mission, Desjardins has remained at theforefront of responsible investment. Its range ofDesjardins SocieTerra Funds and SocieTerra Portfolios isconstantly expanding, and includes an array of productsthat meet a variety of needs.2, 3Desjardins also aims to maintain best practices. Thisis why Desjardins Investments Inc., the manager andsponsor of Desjardins Funds, has been a signatory of thePrinciples for Responsible Investment (PRI)4 since 2010.The PRI is an initiative launched by investors inpartnership with the United Nations EnvironmentProgramme Finance Initiative and the United NationsGlobal Compact that has more than 3,800 signatoriestoday. These signatories from every part of the worldmanage more than US 120 trillion.1 -trends-report/2 .jsp3 Desjardins also offers different investment products that include ESG considerations, suchas market-linked guaranteed investments (MLGIs), exchange traded funds (ETFs) andguaranteed investment funds (GIFs).4 https://www.unpri.org/pri/about-the-pri1
Our responsible investment practicesESG factorsEnvironmental, social and governance factors are basedon the notions of sustainable development5 and corporatesocial responsibility.The nature and materiality of ESG issues vary a greatdeal from one company to another. These issues areparticularly affected by the company’s sector of activityand geographic location. Our portfolio managers focustheir attention on the factors most likely to have asignificant impact on the results of the companiesthey are analyzing.Examples of elements considered for each criterionClimate changeENatural resource use Greenhouse gasemissions Protection ofbiodiversity Resilience toclimate change Water supplyPollution and waste Pollutant emissions Product sustainability Reclaiming ofresidual materialsEnvironmentalopportunities Renewableenergy supply Energy efficiencyEnvironmentalHuman capitalSSocialResponsibility forproducts and services Subcontracting Privacy protection Occupational healthand safety Responsiblepurchasing Competencydevelopment Product reliabilityCorporate governance Managementof impacts oncommunitiesSocial opportunities Access tohigh-quality food Drugs forlarge-scale diseases Access to basicfinancial servicesGovernance practices Independence and expertise of boardsof directorsGSocial acceptability Executive compensation Diversity Financial and extra-financial disclosure Aggressive tax strategy Shareholder rights CorruptionGovernance Lobbying5 Brundtland, G. (1987). Report of the World Commission on Environment and Development: Our Common Future. United Nations General Assembly document tent/documents/5987our-common-future.pdf2
Our beliefs when it comes toinvestment managementDesjardins fosters an economic development respectfulof people and the environment, where “money is at theservice of human development.”We believe that economic players have a responsibilitytoward their communities and their territories, and mustact accordingly. This is why Desjardins Funds seekto promote business practices and corporategovernance that are more respectful of communitiesand the environment.Numerous studies show that companies that areconcerned with ESG issues are better equipped tomanage risks, thereby improving their return potential.Act responsibly, yes, but not at the expenseof profitability!Our responsibilities as a fund managerDesjardins offers its Desjardins SocieTerra Fund andSocieTerra Portfolio holders a double advantage:As the manager of Desjardins Funds, the primaryresponsibility of Desjardins Investments Inc. is tosafeguard the medium- and long-term interestsof holders, while seeking to grow their capital byinvesting in issuing companies with good potentialfor profitability.- Aim to offer an attractive return potential- Seek to contribute to the transitionto a more sustainable worldOur commitmentsSelecting portfolio managersDesjardins intends to remain a recognized leaderin responsible investment. To do so, we make thefollowing commitments:Desjardins prides itself for its portfolio managerselection process.First, our approach and our criteria favour portfoliomanagers renowned for the quality of their approachand results including the incorporation of ESG factors.We aim to have all of our portfolio managers besignatories to the PRI.- Maintaining exemplary practices and stayingabreast of changes in ESG issues.- Annual public reporting of our activities andresults in terms of shareholder engagement bymaking use of best practices, notably thePRI framework.For the SocieTerra line, we choose portfolio managersthat deeply believe that taking ESG factors into accountin corporate management creates value.- Contributing to the training ofdealer representatives.- Informing the general public, including DesjardinsFunds holders, and raising awareness about whatresponsible investment is.3
Implementation strategiesObjective and applicationof the RI PolicySelection processExclusionsThe Desjardins Funds Responsible Investment Policy(the “RI Policy”) describes the approaches we takewhen selecting securities. It also presents shareholderengagement levers that our portfolio managers areusing to improve the ESG practices of the companiesin which they are investing.Exclusions based on the nature of the activitiescarried outCompanies in certain sectors are immediately excludeddue to the activities they carry out.Weapons: No Desjardins Fund invests in companieswhose activities are connected with the productionof weapons or military equipment prohibited byinternational humanitarian law (IHL). Weapons explicitlyprohibited by IHL include cluster munitions, anti-personnelmines, non-detectable fragment weapons, incendiaryweapons, blinding lasers, chemical weapons andbiological weapons. For nuclear weapons, the exclusion isbased on the 1968 Treaty on the Non-Proliferation ofNuclear Weapons.The RI Policy applies to all Desjardins Funds. Theapproaches will vary, however, depending on the fund.Desjardins SocieTerra Funds, which are RI funds, aremanaged using the highest standards for this productcategory. SocieTerra Portfolios benefit from theimplementation strategies applicable to each DesjardinsSocieTerra Fund in which they invest.Traditional Desjardins Funds make use of responsibleinvestment strategies, but with lower requirementsregarding certain aspects.In addition, the SocieTerra line does not invest incompanies whose activities are connected with themanufacturing of automatic or semi-automatic weaponsintended for civilian use, or in companies that generatea major portion of their revenue6 from the sale ordistribution of such weapons.Our responsible investment strategies are implementedat two key times:- When selecting securities, to exclude or choosecompanies based on certain criteria.- When monitoring and managing investments,in order to encourage companies to improve theirpractices regarding ESG issues, which couldrepresent a major risk to their long-termfinancial returns.Tobacco: The Desjardins Funds do not investin companies whose activities are connected withthe processing or production of tobacco products,and the SocieTerra line also excludes companiesthat generate a major portion of their revenue6 fromthe sale of tobacco products.Desjardins SocieTerra Funds,which are RI funds, are managedusing the highest standards forthis product category.Nuclear: The SocieTerra line does not invest incompanies that generate a major portion of theirrevenue6 from the extraction of uranium or theproduction of nuclear energy.There are, however, two exceptions to this rule.Investments may be considered if the activities aredeemed beneficial to people, such as in the case ofmedical equipment manufacturing. In addition, theSocieTerra line may invest in green bonds andsustainable bonds issued by companies that carry outactivities in the production of nuclear energy in order tohelp them invest in renewable energies for the purposeof transitioning to a low-carbon energy mix.6 We generally consider anything more than 10% of a company’s total revenue to bea major portion.4
Exclusions on sovereign issuersFossil fuels: The SocieTerra line does not invest incompanies that generate a major portion of theirrevenue6 from petroleum, natural gas or thermal coalextraction or production, from the operation of gas andpetroleum storage and transportation infrastructure,from oil refining, or from energy production from coal.For SocieTerra funds and portfolios, exclusion criteriaapply to the specificities of sovereign issuers. Thefollowing are thus excluded:Human rights:Sovereign debt of States that are not parties tothe following universal human rights instruments8:In the latter case, investments might be consideredif the company publicly shows a commitment toreducing, within a reasonable time horizon, the portionof coal in its energy mix for the purpose of making anenergy transition. For example, the SocieTerra line mayinvest in green bonds or sustainable bonds issued bycompanies that carry out activities in the productionof energy from coal in order to help them invest inrenewable energies for the purpose of transitioning toa low-carbon energy mix.- International Convention on the Eliminationof All Forms of Racial Discrimination.- International Covenant on Civil andPolitical Rights.- Convention on the Elimination of All Formsof Discrimination against Women.- Convention against Torture and Other Cruel,Inhuman or Degrading Treatment or Punishment.- Convention on the Rights of the Child.The direct distribution of petroleum or natural gasproducts to the end consumer and the distribution ofenergy produced from coal are not excluded. Similarly,renewable natural gas production activities (e.g., biogasand waste reclamation) are not part of this exclusion.- Convention on the Rights of Personswith Disabilities.Debt issued by countries in the bottom 10% ofFreedom House’s annual Global Freedom Report9,whether because of their performance in terms ofpolitical rights or civil liberties.Exclusions based on ESG factorsThe SocieTerra line does not invest in a company thatdoes not meet the minimum ESG factors managementrequirements for its activity sector or the geographicregion in which it operates. The purpose of this approachis to exclude laggards that are not very open to improvingtheir practices.Nuclear weapons: sovereign debt of States thatare not parties to the Treaty on the Non-Proliferationof Nuclear Weapons10.Climate change: sovereign debt of States that are notparties to the Paris Climate Agreement11.Fossil fuels: sovereign debt of emerging countries withlarge fossil fuel reserves12.Also, in accordance with the 10 principles of the UnitedNations Global Compact,7 the Desjardins Funds do notinvest in companies involved in major controversiesregarding their fundamental responsibilities in the areasof human rights, labour, environment or anti-corruption.Note that the SocieTerra line could invest in green,social or sustainable bonds issued by those countries.6 We generally consider anything more than 10% of a company’s total revenue to bea major portion.7 /principles8 OHCHR Core International Instruments9 Countries and Territories Freedom House10 UNODA Treaties11 The Paris Agreement UNFCCC12 Countries with reserves greater than 1,000,000 kg of oil equivalent per capita are excluded.5
Choosing companiesWhen selecting companies, Desjardins Funds portfoliomanagers use many approaches beyond looking attraditional financial considerations.13Best-of-sector approachIn the Best-of-sector approach, portfolio managersselect the companies that stand out from their peersin the management of ESG factors. Companies arecompared on a sector basis. This allows portfoliomanagers to choose the most avant-garde companiesin each sector in order to maintain optimal portfoliodiversification.Thematic investingBest-in-universe approachThematic investing is aimed at companies whoseactivities contribute to a more sustainable economy.Renewable energy, sustainable transport, biodiversityand healthy eating are examples of thematicsin this category.In the Best-in-universe approach, portfolio managersselect the companies that stand out from their peers intheir management of ESG factors, irrespective of theirsector. It allows portfolio managers to disregard certainmarket sectors or segments where no company meetstheir minimum expectations.Impact investingImpact investing consists in investing with the intentionof generating a beneficial and measurable impact onthe community and the environment. To meet thisobjective, portfolio managers invest in companieswhose products and services respond to specificenvironmental or social challenges.Best-effort approachThe Best-effort approach aims to select companies thatare willing to improve their management of ESG factors.This approach applies especially to smaller companiesor to companies operating in emerging markets. It isusually accompanied by a dialogue that aims to helpthe companies incorporate sustainable developmentinto their practices or improve the disclosure of theirenvironmental and social performance.13 The approach used for each Desjardins Fund by portfolio managers is described in theDesjardins Funds Simplified Prospectus of the respective Desjardins Fund.6
Issuer monitoringDesjardins Funds portfolio managers regularly monitorthe issuers in which they invest. First of all, they makesure their financial performance meets our expectations.Secondly, they ensure that the issuers continues tomeet our ESG criteria.StewardshipIn accordance with its mission and values, Desjardinshas chosen to be an engaged player with issuers inwhich Desjardins Funds have stocks or bonds. Exercisingvoting rights, dialogue and shareholder proposals arethe three levers that our portfolio managers use toimprove practices and disclosure regarding ESG issues.DialogueEngaging in a dialogue with an issuer is a powerful leverfor change, based on a constructive relationship.Our portfolio managers identify the issues that theywould like to see improved and then target thecompanies that they want to establish a businessrelationship with. They may also take part incollaborative dialogues with other portfolio managersand investors when deemed appropriate.Exercising voting rightsExercising voting rights allows shareholders to expressthemselves on all the topics brought to the shareholders’meeting in the form of proposals. Most proposals aresubmitted by management and deal with electingdirectors and compensating senior officers. Particularly,we pay attention to two important factors: directorindependence and board diversity.Shareholder proposalWe are also called to vote on proposals submitted byother shareholders. Each proposal is evaluated bylooking at the established practices in the companyconcerned and in comparable companies.When dialogue proves ineffective, we can drafta shareholder proposal to be submitted at theshareholders’ meeting. When we bring our concernsto all the shareholders like this, we sometimes maximizeour chances of being heard by management andultimately reaching our objectives.The Desjardins Funds Policy on the Exercise of ProxyVoting Rights as well as recorded votes, are available onthe Desjardins Funds website.14DivestmentDivesting from an issuer which we have selected atthe end of a rigorous process is an exceptional act.Divestment is generally preceded by variousunsuccessful shareholder engagement initiatives.Divestment can arise in the event of a major crisis,poor behaviour or a serious breach of the principlesof our Responsible Investment Policy.14 ions/index.jsp 7
Desjardins Investments Inc.Desjardins Funds Customer Service514 286-3499 (in the Montréal area)1 866 insfunds.comThe Desjardins Funds are not guaranteed, their value fluctuates frequently and their past performanceis not indicative of their future returns. Commissions, trailing commissions, management fees andexpenses all may be associated with mutual fund investments. Please read the prospectus beforeinvesting. The Desjardins Funds are offered by registered dealers.(05-22)The Desjardins brand is a trademark of the Fédération des caissesDesjardins du Québec and used under license.
responsible investment. Responsible investment (RI), also known as "sustainable investment" or "socially responsible investment", consists of incorporating environmental, social and governance (ESG) factors into the selection and management of investments. Desjardins is a responsible investment pioneer. In 1990,
Desjardins Group is a pioneer in responsible investment (RI) in Quebec and elsewhere in Canada (with more than 7.4 billion in RI assets under management and over 30 product . options as at December 31, 2020). It is a leading supporter and promoter of this approach in Canada. Responsible investment incorporates an analysis of ESG factors into .
Support for members in the U.S. with Desjardins Bank and the Caisse centrale Desjardins U.S. branch Present in 30 countries thanks to Développement international Desjardins Close to 80 million given back to communities in the form of donations, bursaries and sponsorships a
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