Summary of responses to the PRI reporting and assessment tool 2009

Ethical Funds Company, The

Organisational Overview
Organisational Overview

This section captures information that helps determine if some of the subsequent questions are required and also plays a role in benchmarking. Please make sure you provide accurate answers.
This is also one of the more challenging sections as it may require gathering information from multiple sources. We suggest you collect all this information before progressing to other parts of the questionnaire.

1. What were your organisation's total assets under management as of the most recent count (in millions)?

(Estimating to the nearest hundred million as of December 31 2008 would be preferable - although the most recent available count would be sufficient. If your currency is not listed, please select 'other' and indicate your currency or convert to United States dollars.)

1400
Please select currencyCanadian dollar (CAD)
1a. If 'Other' was selected, please specify the other currency hereNo Answer

2. Please pick the one category and level of complexity that best describes your organisation (if your organisation is a pension fund, please also select your pension type). This information may be used to provide you with the best possible benchmarking.

Complexity

  • Highly complex:- (>20 investment strategies, multiple offices in different countries)
  • Moderately complex:- (5-20 investment strategies, a few offices)
  • Simple:- (<5 investment strategies, one office)
Category
Complexity
Socially responsible investment managerModerately complex
2a. If 'Other' was selected, please specify the other category hereNo answer
3. Please provide an approximation of your average asset mix for 2008 or your asset mix as of the most recent count (in percent):

(+/- 5% is sufficient. The sum of all the fields must be 100%)

 
Internal
Active
Internal
Passive
External
Active
External
Passive
Listed equity (developed markets)00761
Listed equity (emerging markets)0010
Fixed income (not including corporate issuers)00100
Fixed income (corporate issuers)0090
Private equity0000
Listed real estate or property0000
Non-listed real estate or property0000
Hedge funds0000
Commodities0000
Infrastructure0000
Cash0030
Other (Please specify):
0000
Governance, Policy and Strategy
Governance, Policy and Strategy

Questions 5 through 15 are about the governance and oversight of your organisation's responsible investment activities and the associated policies and strategy. This section will be scored separately from the six Principles.

"Policy" in this section may refer to one overall RI policy or multiple policies that address various elements of RI.

5. Do you have a policy that makes specific reference to responsible investment (RI) or environmental, social, and governance (ESG) issues?Yes
6. If you have a policy that makes specific reference to RI/ESG issues, which of the following Principles does it address?

(Please check all that apply.)

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.,Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.,Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.,Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.,Principle 5: We will work together to enhance our effectiveness in implementing the Principles.,Principle 6: We will each report on our activities and progress towards implementing the Principles.
7. If you have a policy that makes specific reference to RI/ESG issues, which of the following asset classes does it apply to?

(Please check all that apply.)

Listed equity (developed markets),Listed equity (emerging markets),Fixed income (not including corporate issuers),Fixed income (corporate issuers),Cash (not included in scoring)
8. If you have a policy that makes specific reference to RI/ESG issues, when was your policy last reviewed?Within the last 3 years
9. If you have a policy that makes specific reference to RI/ESG issues, has it been disclosed publicly?

(If answering yes, please indicate how this statement can be obtained - a URL would be sufficient. If answering no, please explain why not.)

Yes: 'https://www.ethicalfunds.com/en/Investor/ChangingTheWorld/HowWeWork/Pages/default.aspx'
10. To what extent has your approach to responsible investment been translated into a plan of action as reflected in business planning, strategic planning, or similar internal management processes?

  • Large extent: you have both long and short term RI objectives relating to various aspects of your RI program across asset classes and regions that are regularly updated or reviewed. Larger organisational objectives have been reduced to individual objectives for which staff members are held accountable on a regular basis. There are key performance indicators related to responsible investment and resources have been allocated. You feel you have invested considerably in RI implementation and processes.
  • Moderate extent: you have a plan for some aspects of your RI program but not others. Some staff members have specific RI objectives. High level goals may be understood but not documented. You feel you are progressing in RI implementation but have some way to go.
  • Small extent: you have developed a list of actions when you first adopted responsible investment or your approach to RI is ad hoc with new initiatives being implemented as time allows. You are at an early stage in your RI implementation.
To a large extent
11. Who within your organisation has responsibilities related to RI implementation?

(Please check all that apply.)

Board of trustees or board of directors,Committee of the board of trustees or board of directors,Chief Executive Officer or Chief Investment Officer or equivalent,Other senior management,Middle management,RI or ESG specialist,Non RI or ESG investment professional
12. Do you have a policy or approach/process that requires screening out or excluding stocks or sectors from your investment universe?Stocks
13. What are your reasons for screening out or excluding stocks or sectors from your investment universe?

(Please check all that apply.)

We (and/or our clients) wish to avoid supporting the companies/sectors in question based on ethical considerations and we regard buying/holding their stock as providing such support,We wish to avoid potential negative publicity surrounding the companies/sectors in question as it may reflect adversely on our brand/licence to operate,We believe that it is possible to exclude companies/sectors which will prove to be long term chronic underperformers in terms of their ability to maintain and grow earnings i.e. our exclusion is based on a high level integration,We believe that certain companies/sectors are vulnerable to negative publicity surrounding the nature of their business and that this may have an adverse effect on share price performance (i.e. our screening is based on controlling investment risk),Other (please specify): 'Our ESG evaluations methodology is based on risk identification and risk mitigation.'
14. Please describe how your organisation assesses if there is a link between your RI activities and the performance (risk and return) of your investments:The Ethical Canadian Index Fund is the TSX Composite Index, minus stocks which have been excluded from our portfolio because of ESG risk. We track the performance of the EThical Canadian Index against its benchmark, the TSX Composite Index on a daily, weekly and monthly basis. We are confident that Ethical Funds' comprehensive Sustainable Investing Program adds outstanding value for our unit holders from every perspective - environmental, social and financial. In 2008 the Ethical Canadian Index outperformed the S&P/TSX Composite Index (Total Return) by 70 basis points. This information is available on our website for investors to view and track.
15. Please add any overall comments and clarifications related to Governance, Policy, and Strategy here.Ethical Funds develops our engagement strategy based on an annual systematic process. Our strategy development takes into account our sector exposure, expert opinion, unit holder attitudes (based on annual unit holder survey), Canadian values (based on GlobeScan surveys), sector impact and material risk analysis.
Principle 1
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

For the purposes of this questionnaire, integration is the consideration of ESG issues alongside traditional financial measures, based on the belief that ESG issues can affect the performance (risk and/or return) of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). Please note that the view that ESG issues can influence investment returns may be based either on

  1. the premise that performance on these issues will eventually be reflected in financial and operational outcomes (revenue growth, margins, etc.) or
  2. the premise that the way in which the market rates or prices the stock will be affected even in the absence of an impact on financial or operational performance. However, exclusion of stocks from portfolios or downweighting them based on the possibility that an association with the stocks may adversely affect the owners profile or brand amongst stakeholders is not regarded as integration.
16. Please provide a one to two paragraph description of your approach to this Principle.

This question and similar questions relating to each of the other Principles are being asked for three reasons. The first reason is to gather details regarding signatory implementation for inclusion in the PRI annual report on progress. The second reason is to capture activities not captured directly by questions in the Reporting and Assessment Tool. The third reason is to provide context and details to support verification calls.

Our analysts evaluate, rate, and rank the ESG systems and performance of companies within our investment universe. Ethical Funds uses a proprietary methodology to create a Corporate Sustainability Scorecard (CSS), covering seven Key Results Areas (KRAs)  the environment, health and safety, employee relations, community relations, human rights, transparency and corporate governance. To evaluate companies in a way that is accurate, complete, material, timely, and comparable, we base our analysis on Key Performance Indicators (KPIs) of corporate systems and performance  50 to 150 per company, depending on the sector. Evaluation results are used to select qualified companies for investment by Ethical Funds. If evaluation reveals concerns about a company's disclosure or performance, it may become a candidate for shareholder action.
Integration of ESG issues into investment analysis and decision-making processes of internally managed assets
17. For what percentage of your internal assets under active management do you integrate RI/ESG issues into your internal investment decision-making processes (in percent)?

(+/- 5% is sufficient.)

Listed equity (developed markets)
Listed equity (emerging markets)
Fixed income (not including corporate issuers)
Fixed income (corporate issuers)
Private equity
Listed real estate or property
Non-listed real estate or property
Hedge funds
Infrastructure
18. To what extent have you integrated RI/ESG issues into your internal active investment decision-making processes?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: you employ a systematic process to integrate RI/ESG issue consideration. RI/ESG issues may be considered in security valuation, security selection, and/or portfolio construction.
  • Moderate extent: for some RI/ESG issues you may have a systematic integration approach while for other issues you approach them in an ad hoc manner or not at all.
  • Small extent: for a few RI/ESG issues you may integrate consideration some of the time.
Listed equity (developed markets)No Answer
Listed equity (emerging markets)No Answer
Fixed income (not including corporate issuers)No Answer
Fixed income (corporate issuers)No Answer
Private equityNo Answer
Listed real estate or propertyNo Answer
Non-listed real estate or propertyNo Answer
Hedge fundsNo Answer
InfrastructureNo Answer
19. When forming investment views, to what extent does your organisation gather and analyse ESG information, including, where applicable, information obtained from engagement activities?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: you gather and analyse information across a comprehensive range of ESG issues and across a large proportion of the markets and assets in your investment universe. Furthermore, the information is updated regularly. This research and analysis may be undertaken internally or may be purchased from an external party. In the latter case, internal resources are nevertheless applied to interpreting the information. Alternatively, one or more ESG issues may be the key driver for your overall investment strategy and process.
  • Moderate extent: you gather and analyse information across a moderate range of ESG issues and across a significant part of your investment universe. There remain some gaps in coverage, either in terms of the issues and asset markets covered, or the frequency with which analysis is refreshed, as well as some gaps in internal capacity to analyse the information.
  • Small extent: you gather and analyse some information on ESG issues. This research is ad hoc in nature, however, and considerable gaps exist in coverage and timeliness. You feel that you are in the early stages of developing capacity to gather and analyse information on ESG issues.
  • Not applicable: only a possible answer if you don't manage assets internally.
No Answer
20. To what extent do portfolio managers or others making investment decisions in your organisation apply the ESG information and analysis available to them when constructing and managing portfolios?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: you have a systematic approach towards assessing the implications of all ESG research and analysis which is gathered by your organisation and incorporating it into your assessment of the investment outlook for all investments which are potentially affected and, hence, into portfolio holdings.
  • Moderate extent: you regularly consider the implications of ESG research for investments where the case for doing so is clear-cut. In other cases, however, ESG research is not thoroughly assessed and applied in formulating views on all investments where it may be relevant.
  • Small extent: ESG research is used on an  as-needed basis. Generally, ESG research may be used as part of a qualitative overlay and to decide between investments where the investment case, judged on traditional analysis, is marginal. Alternatively, ESG research may be applied in portfolios only in respect of a relatively small number of sectors where one or more ESG issues are of most obvious relevance e.g. major corporate governance failings, high exposure to heavy polluters.
  • Not applicable: only a possible answer if you don't manage assets internally.
No Answer
21. To what extent do you have a process for improving the effectiveness of research and portfolio management processes with regards to ESG factors?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: on a continuous basis, you review both the quality and relevance of ESG research and the effectiveness with which it is applied in your day-to-day portfolio management, with a view to optimising your overall investment process through identifying opportunities or risks.
  • Moderate extent: you review ESG research regularly (at least annually) with a view to enhancing its coverage and relevance and/or the way it is used in portfolio management. The focus is both on identifying investment opportunities and avoiding risks.
  • Small extent: you occasionally review the integration of ESG research.
No Answer
22. To what extent do you have a process for assessing and improving internal investment staff competency to incorporate RI/ESG issues into investment analysis and decision-making processes?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: all relevant staff members undergo a regular assessment of their RI competency, resulting in an individual plan for ongoing professional development. In addition, the overall skill mix within the team is regularly reviewed to identify any gaps. RI-competency may be integral to recruitment decisions.
  • Moderate extent: relevant staff members are encouraged to undertake relevant external RI-related training and some in-house sessions are provided. RI-competency may be an element in recruitment decisions.
  • Small extent: relevant staff members are permitted, at the organisation's cost, to attend external RI-related training courses, conferences etc.
No Answer
Integration of ESG issues into investment analysis and decision-making processes of externally managed assets
23. For what percentage of your external assets under management are RI/ESG issues integrated into the investment decision-making processes of your external investment managers (in percent, +/- 5% is sufficient)?
Listed equity (developed markets)100
Listed equity (emerging markets)100
Fixed income (not including corporate issuers)100
Fixed income (corporate issuers)100
24. To what extent have RI/ESG issues been integrated into the investment decision-making processes of your external investment managers?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q23.)

  • Large extent: your investment manager employs a systematic process to integrate RI/ESG issue consideration. RI/ESG issues may be considered in security valuation, security selection, and/or portfolio construction.
  • Moderate extent: for some RI/ESG issues your investment manager may have a systematic integration approach while for other issues they approach them in an ad hoc manner or not at all.
  • Small extent: for a few RI/ESG issues your investment manager may integrate consideration some of the time.
Listed equity (developed markets)To a large extent
Listed equity (emerging markets)To a large extent
Fixed income (not including corporate issuers)To a large extent
Fixed income (corporate issuers)To a large extent
25. To what extent do you consider the capabilities of external investment managers to incorporate RI/ESG issues when searching for, selecting and retaining your external investment managers?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q23.)

  • Large extent: ESG integration is integral to your views on all of your investment managers and, hence, on your hire, fire and retain decisions. You look at the ESG information available to your managers, the way that they integrate it into their investment decisions and the competence of their staff in ESG areas. Where you believe that managers are not developing their capabilities to your satisfaction, you raise your concerns with them and ensure that they recognise the importance of RI capability in determining the awarding of future mandates.
  • Moderate extent: ESG integration is part of your assessment of all managers and there have been cases where your degree of comfort with a manager has been affected by their performance in the area. You may have made hire/fire decisions on this basis on rare occasions. You monitor the resources which the managers devote to the area and encourage them to develop their capability. You do not, however, tend to investigate the way that ESG research is reflected in portfolios.
  • Small extent: you observe that your existing and potential managers have differing degrees of commitment to RI/ESG integration and, at the margin, favour those with higher commitment. This issue could be a factor in hire and fire decisions in the future. You have not, however, made a detailed assessment of the RI-related resources applied by all of your managers, nor of the way that such resources are integrated into the investment process.
To a large extent
Integration - final comments
26. Please add any overall comments and clarifications related to Principle 1 here. Please also describe any significant activities relating to Principle 1 that have not been captured by the questions above.Ethical Funds hosted the third annual Portfolio Managers Symposium in 2008 for the portfolio managers of its 16 investment funds. Collectively, this group manages over $100 billion in assets in both socially responsible investment (SRI) funds and conventional funds. The two-day event, brought together members of Ethical Funds management and sustainability teams with its portfolio managers Guardian Capital, QV Investors, Manning & Napier Advisors, Highstreet Asset Managers, Beutel Goodman and William Blair & Company. Discussions by the participants were enriched by presentations from invited guests Len Coad of the Conference Board of Canada on the Carbon Disclosure Project, and David Deisley, the General Counsel of Goldcorp, on the Canadian mining company's operations in Guatemala. This annual event serves as an opportunity to further enhance the relationship we have with our portfolio managers and to provide them with in-depth briefings on emerging ESG issues.
Principle 2
Principle 2:

We will be active owners and incorporate ESG issues into our ownership policies and practices.

27. Please provide a one to two paragraph description of your approach to this Principle.Each year Ethical Funds targets 20% of its portfolio by assets for shareholder action. We choose the companies we will engage  our annual Focus List  based on a systematic review of material ESG risks, exposure to these risks within our funds, and where we can be most effective. We devote a great deal of effort to ensuring that the proxies owned by our investors are voted in accordance with our detailed Proxy Voting Guidelines. Ethical Funds was the first mutual fund company in Canada to disclose its proxy voting guidelines and activities - long before this was made compulsory. Our Proxy Voting Activity Report shows you how we voted our proxies for each company in our portfolios  and why. Our website also has a real-time Proxy Voting Tool which allows you to search by company to see how we voted on each ballot item, with notes explaining our voting position on each item.

(Proxy) voting - applies only to listed equity (developed markets), listed equity (emerging markets) and listed real estate or property.

28. Do you have a (proxy) voting policy?

(If 'Yes - disclosed publicly', please indicate how your (proxy) voting policy can be obtained- a URL would be sufficient. If answering no, please explain why not.)

Yes - disclosed publicly: 'https://www.ethicalfunds.com/SiteCollectionDocuments/docs/proxy_voting_guidelines.pdf'
29. Does your (proxy) voting policy address environmental, social, and governance issues?
EnvironmentalYes
SocialYes
GovernanceYes
30. Who decided how to vote on ballot items on behalf of your organisation in 2008?

(Please check all that apply.)

Internal voting or governance group
31. To what extent is information related to ballot items gathered and analysed before voting decisions are made?

  • Large extent: you might buy external voting research and recommendations and supplement it with your own research. Alternatively, you may undertake the research largely in-house. You review each ballot item before casting your votes and undertake whatever analysis is necessary to make an informed judgement.
  • Moderate extent: you might either buy external voting research and recommendations or perform your own research. You review most ballot items before casting your votes and undertake whatever analysis is necessary in most cases to make an informed judgement.
  • Small extent: You generally rely on your research provider to gather and analyse ballot items. You might perform some very limited research on a small number of issues. You might only review some ballot items before your votes are cast and don't usually undertake additional analysis to make an informed judgement.
To a large extent
32. Do you ensure that voting is done in accordance with your voting instructions?Yes for all
33. Do you inform companies of your rationale when you abstain or vote against management recommendations?Yes for all
34. Please indicate how many resolutions you could have voted on and how many resolutions you did vote on in 2008:

(include abstentions as votes where votes against are not possible, use the last available one year period if information for 2008 is not available or too difficult to gather, approximate numbers are acceptable. If you are unable to provide the exact number please provide an approximation of the percentage by entering 10 in the 'Resolutions could have voted on' column and your estimate in the 'Resolutions voted on' column. So if you voted on about 70% of the possible resolutions you would enter 7 in the 'Resolutions voted on' column. If you are not sure, please enter a 1 in all four fields.)

 
Resolutions could have voted on
Resolutions voted on
Domestic1010
Foreign1010
35. For the listed equities that you manage, do you provide (proxy) voting services for your clients if they request them?Yes - According to our own policy
36. How does your securities lending program address voting?We do not have a securities lending program
37. How many shareholder resolutions related to ESG issues did you file or co-file during 2008?
As lead filer11
As co-filer1
Planning to be lead filer in 20098
Planning to be co-filer in 20091
38. Please explain why you did or did not file or co-file any shareholder resolutions related to RI/ESG issues during 2008:As active shareholders, we can deploy many strategies to advance change within companies. The choice of strategy often depends on how responsive a company is to our initial approach. The process is flexible and the strategy may adapt as necessary with changing circumstances. Ethical Funds takes a  dialogic approach in its engagements with companies: first, we talk. This allows us to gain insight into company decision-making procedures, identify internal change agents and provide them with the information and arguments they need to influence top executives and board directors. In all our dialogues, we alert companies to ESG risks and propose solutions to these tough challenges. If attempts at dialogue are not yielding satisfactory results, we may file a shareholder resolution. Ethical Funds was the first mutual fund company in Canada to use the shareholder resolution as a tool in shareholder action.
Engagement - general
39. Who engaged with companies to seek ESG improvements in 2008?

Please rank who engaged with companies according to their importance within your overall active ownership activities. You can only select Most, Second, Third and Fourth most important once each. Only the method you rank as 'Most important' will be scored for benchmarking purposes. If you wish to request that your other methods of engagement also be scored, please complete all the relevant sections and email the PRI at assessment@unpri.org when you submit your response.

Internal staffMost important
External investment manager(s)Did not engage with companies in 2008
External engagement service provider(s)Did not engage with companies in 2008
Other (Please specify):
No Answer
40. Do you have a written engagement policy or other documents that direct engagement?

(If 'Yes - disclosed publicly', please indicate how your policy can be obtained- a URL would be sufficient.)

Yes - disclosed publicly: 'https://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf'
41. If you have an engagement policy or other documents that direct engagement, what do they include?

(Please check all that apply.)

General high level policy to support direction of agents to engage with companies,Indication of what markets it applies to,Expectations of companies with regards to environmental issues,Expectations of companies with regards to social issues,Expectations of companies with regards to governance issues,Approach to monitoring companies,Approach to selecting companies for engagement,Approach to measuring engagement success
42. How many companies are you invested in?700
Engagement - internal staff
43. To what extent do you have a process for identifying and prioritising ESG related engagement opportunities?

  • Large extent: you gather and analyse information across a comprehensive range of ESG issues and across a large proportion of the markets in your investment universe. Furthermore, the information is updated regularly. This research and analysis may be entirely undertaken internally or may be purchased from an external party. In the latter case, however, it is understood that some internal resource would be required to interpret the information. Your research may include an analysis of the impacts of various issues on specific companies and prioritisation of engagement opportunities.
  • Moderate extent: you gather and analyse information across a moderate range of ESG issues and across a significant part of your investment universe. There are some gaps in your coverage however, either in terms of the issues and markets covered, or the frequency with which analysis is refreshed.
  • Small extent: you gather and analyse some information on ESG issues. This research is ad hoc in nature, however, and considerable gaps exist in coverage and timeliness. The process may be largely reactive rather than proactive.
To a large extent
44. How many portfolio companies did you engage with on ESG issues in 2008?
  • Extensive engagement: you may have had multiple instances of focused interaction with a company on issues identified by you and with a view to changing the company's behaviour. You were predominantly engaging with people at the company with the authority to change corporate behaviour. The engagements were systematic and you began them with a clear goal in mind. Extensive engagement includes more than writing letters and includes bilateral meetings in person or on the phone. You may have identified other investors to work with to address the issues you have identified.
  • Moderate engagement: you had more than one interaction with a company on issues identified by you or others. The engagement was somewhat systematic but the specific desired outcome may not have been clear at the outset. You may have responded to requests to engage with other investors on issues identified by them.
  • Basic engagement: you directly contacted companies but your engagements tended to be ad hoc and reactive. At the commencement of the engagement, you may not have had clear goals in mind regarding the desired changes to the company's behaviour and you may not have pursued the issue beyond your initial contact with the company. You may have signed on to letters authored by others. Your engagements might be more about gathering information than seeking ESG related improvements.
Extensive engagement55
Moderate engagement35
Basic engagement610
45. What proportion of your engagements addressed environmental, social or governance issues (in percent)?

(One engagement may address more than one issue, so the three percentages need not add to 100%. For example, if you only had one engagement and it addressed environmental and governance issues then the answer would be 100% for environmental and 100% for governance.)

Environmental57
Social32
Governance14
46. To what extent do you set ESG engagement objectives and attempt to evaluate your engagement success?

  • Large extent: you may have developed a clear and systematic process (either through internal efforts or in partnership with an academic or other group) to regularly measure the impact of your engagement efforts. You set engagement objectives before engaging with companies and track outcomes against those objectives.
  • Moderate extent: you may have developed a process to measure the impact of your engagement efforts but may not always apply it. You might set engagement objectives sometimes before engaging with companies.
  • Small extent: you tend not to set engagement objectives before engaging with companies and may only keep track of your successful engagements.
To a large extent
47. What percentage of engagements that ended in 2008 were deemed successful (in percent)?

(Engagement success: a considerable part of objectives or milestones that were set when the engagement commenced were achieved.)

50
48. To what extent do you have a process for assessing and improving staff competency to act as active owners and incorporate ESG issues into ownership practices?

  • Large extent: all relevant staff members undergo a regular assessment of their competency in the area of active ownership, resulting in an individual plan for ongoing professional development. In addition, the overall skill mix within the team is regularly reviewed to identify gaps. Competency in the skills required to implement active ownership practices is integral to recruitment decisions.
  • Moderate extent: relevant staff members are encouraged to undertake relevant external training and some in-house sessions are provided. Competency in active ownership activities is an element in recruitment decisions.
  • Small extent: relevant staff members are permitted to attend external training courses, conferences etc, paid for by the organisation, where the events will enhance active ownership competencies.
To a large extent
Engagement - external engagement service provider(s)
49. This question is not applicable to you due to your response to Q39 regarding who engages with companies. How many portfolio companies did your external engagement service provider(s) engage with on ESG issues on your behalf in 2008?
  • Extensive engagement: your external engagement service provider(s) may have had multiple instances of focused interaction with a company on issues identified by you or them and with a view to changing the company's behaviour. Your external engagement service provider(s) was predominantly engaging with people at the company with the authority to change corporate behaviour. The engagements were systematic and they began them with a clear goal in mind. Extensive engagement includes more than writing letters and includes bilateral meetings in person or on the phone. They may have identified other investors to work with to address the issues you or they have identified.
  • Moderate engagement: your external engagement service provider(s) had more than one interaction with a company on issues identified by you, them or others. The engagement was somewhat systematic but the specific desired outcome may not have been clear at the outset. Your external engagement service provider(s) may have responded to requests to engage with other investors on issues identified by them.
  • Basic engagement: your external engagement service provider(s) directly contacted companies but their engagements tended to be ad hoc and reactive. At the commencement of the engagement, they may not have had clear goals in mind regarding the desired changes to the company's behaviour and they may not have pursued the issue beyond their initial contact with the company. Your external engagement service provider(s) may have signed on to letters authored by others. Their engagements might be more about gathering information than seeking ESG related improvements.
Extensive engagement
Moderate engagement
Basic engagement
50. This question is not applicable to you due to your response to Q39 regarding who engages with companies. What proportion of your external engagement service provider(s)'s engagements on your behalf addressed environmental, social or governance issues (in percent)?

(One engagement may address more than one issue, so the three percentages need not add to 100%. For example, if you only had one engagement and it addressed environmental and governance issues then the answer would be 100% for environmental and 100% for governance.)

Environmental
Social
Governance
51. This question is not applicable to you due to your response to Q39 regarding who engages with companies. To what extent do you contribute to and assess the ESG engagement activities of your external engagement service provider(s)?

  • Large extent: you probably have a regular dialogue with your service provider to identify and prioritise engagement issues. You may also collaborate with them to set engagement objectives. You require and review regular reporting on engagement activities performed on your behalf. You question why companies have or have not been engaged, the success of the engagements, and the background and experience of staff performing engagement for you, with a view to assessing the value of the service on an ongoing basis.
  • Moderate extent: you keep up-to-date with issues being pursued by your provider but do not generally participate in determining the issues or the objectives. You require and review regular reporting on engagement activities performed on your behalf. You evaluate the merit of the service regularly (say, annually) but do not undertake in-depth analysis in doing so.
  • Small extent: you receive reporting on engagement activities performed on your behalf but have minimal dialogue with your service provider. You do not evaluate the merit of the service regularly.
No Answer
Engagement - external investment manager(s)
52. This question is not applicable to you due to your response to Q39 regarding who engages with companies. How many portfolio companies did your external investment manager(s)'s engage with on ESG issues on your behalf in 2008?
  • Extensive engagement: your external investment manager(s) may have had multiple instances of focused interaction with a company on issues identified by you or them and with a view to changing the company's behaviour. Your external investment manager(s) was predominantly engaging with people at the company with the authority to change corporate behaviour. The engagements were systematic and they began them with a clear goal in mind. Extensive engagement includes more than writing letters and includes bilateral meetings in person or on the phone. They may have identified other investors to work with to address the issues you or they have identified.
  • Moderate engagement: your external investment manager(s) had more than one interaction with a company on issues identified by you, them or others. The engagement was somewhat systematic but the specific desired outcome may not have been clear at the outset. Your external investment manager(s) may have responded to requests to engage with other investors on issues identified by them.
  • Basic engagement: your external investment manager(s) directly contacted companies but their engagements tended to be ad hoc and reactive. At the commencement of the engagement, they may not have had clear goals in mind regarding the desired changes to the company's behaviour and they may not have pursued the issue beyond their initial contact with the company. Your external investment manager(s) may have signed on to letters authored by others. Their engagements might be more about gathering information than seeking ESG related improvements.
Extensive engagement
Moderate engagement
Basic engagement
53. This question is not applicable to you due to your response to Q39 regarding who engages with companies. What proportion of your external investment manager(s)'s engagements on your behalf addressed environmental, social or governance issues (in percent)?

(One engagement may address more than one issue, so the three percentages need not add to 100%. For example, if you only had one engagement and it addressed environmental and governance issues then the answer would be 100% for environmental and 100% for governance.)

Environmental
Social
Governance
54. This question is not applicable to you due to your response to Q39 regarding who engages with companies. To what extent do you contribute to and assess the ESG engagement activities of your external investment manager(s)?

  • Large extent: you require and review regular reporting on engagement activities performed on your behalf. You have regular discussions with your external managers on the issues to be pursued through engagement and the engagement objectives. You also have a dialogue on why companies have or have not been engaged, the success of engagements, and the background and experience of staff performing engagement for you. You regularly evaluate the managers' engagement activity based on these dialogues and other analysis.
  • Moderate extent: you take an active interest in the managers' engagement activities but do not have regular dialogue with the manager. You require and review regular reporting on engagement activities performed on your behalf. You evaluate the managers' engagement activity regularly (say annually) but do not undertake additional analysis in doing so.
  • Small extent: you receive reporting on engagement activities performed on your behalf where provided but do not actively seek to discuss engagement activities with your managers. You do not evaluate the managers' engagement activities regularly.
No Answer
55. This question is not applicable to you due to your response to Q39 regarding who engages with companies. Did you consider the capabilities of external investment managers to engage with companies on ESG issues on your behalf when searching for, selecting and retaining your investment managers?No Answer
Engagement - final comments
56. What ESG issues were addressed in your or your service providers' engagement initiatives?

(Please check all that apply.)

Activities in conflict zones,Benefits and compensation,Bribery/corruption,Climate change,Environment,Governance,Health,Health and safety,HIV/AIDS,Human rights,Labour issues
57. What measures do you or your external service provider(s) use to assess the impact and success of engagement?As mentioned earlier, Ethical Funds has a systematic and strategic process for developing objectives for corporate engagement. We publish these objectives on our website under the 'Focus List'. https://www.ethicalfunds.com/en/Investor/ChangingTheWorld/DifferencesWeMake/MakingGoodCompaniesBetter/Pages/FocusList_2008.aspx Ethical Funds updates this webpage on a monthly basis, continually reporting on progress of each dialogue, and measuring our success as either 'progressing positively', 'neutral' or 'negative'. In addition to this monthly disclosure, Ethical funds publishes and Annual Report which measures performance against set objetives for the work of the Sustainability Department. That report is referenced throughout this assessment, and is indexed against the UNPRI Principles.
58. Please add any overall comments and clarifications related to Principle 2 here. Please also describe any significant activities relating to Principle 2 that have not been captured by the questions above.Of the 12 shareholder resolutions we filed, we were able to withdraw eight after companies signalled a willingness to respond to our concerns in meaningful ways. When our resolutions did go to a vote, we were successful in soliciting the support of other shareholders. Our challenge to Power Corporation to explain how its indirect investment in Burma through Total squares with its Corporate Social Responsibility Statement garnered the support of 30% of shareholders independent of senior management. We voted proxies at 401 company meetings and opposed management's recommendations to shareholders 38% of the time. This reflects our continuing dissatisfaction with lack of crucial components of good governance such as director and auditor independence at many companies - as well as our concerns about top executive compensation.
Principle 3
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
59. Please provide a one to two paragraph description of your approach to this Principle.Complete disclosure of material information on risks and opportunities facing companies  economic, social and environmental - is the basis for healthy investment markets. That is why at Ethical Funds we work to improve the scope and quality of corporate disclosure. We highlight areas for improvement in compulsory corporate reporting, and encourage the companies we own to offer supplementary voluntary disclosure complying with Global Reporting Initiative (GRI) guidelines.Evaluating companies gives us deep insight into the state of corporate disclosure, which sharpens the focus of our shareholder action and government relations work to improve disclosure, which will enhance the quality of information for our future company evaluations. Sometimes a change in the rules is needed to improve disclosure or performance across a whole sector. Therefore Ethical Funds often raises its voice in consultation processes on regulations and standards relating to corporate sustainability.
60. Who asked investee companies (or other investment entities) to provide information about their ESG policies, practices or performance in 2008?

(Please check all that apply.)

Internal staff,Internal staff collaboratively with other investors,External investment manager(s)
61. To what extent did you or your external engagement service provider(s) or your external investment manager(s) have a dialogue with investee companies (or other investment entities) regarding the production of standardized reporting about their ESG policies, practices or performance in 2008?

('Standardized' could also include systematic reporting in areas where standardized reporting has not yet emerged.)

  • Large extent: you or your agents have direct contact with companies and regularly encourage systematic ESG reporting by them. You or your agents have a systematic approach to assessing the quality of reporting across a range of issues which are judged to be important and ask for standardised reporting where appropriate. You or your agents have taken a leading role in investor collaborations seeking systematic reporting by companies. You or your agents may also regularly provide feedback to companies on their reporting.
  • Moderate extent: you or your agents have direct contact with companies. You or your agents ask them to provide standardised reporting on key ESG issues from time to time, but you do not have a systematic approach to identifying cases where scope exists for improved reporting. You or your agents may also occasionally provide feedback to companies on their reporting.
  • Small extent: you or your agents have signed on to one or more collaborative initiatives regarding standardised reporting. You or your agents may also have occasionally asked companies for standardised reporting and /or provided feedback on their reporting.
Listed equity (developed market)To a large extent
Listed equity (emerging markets)To a small extent
Fixed income (not including corporate issuers)Not at all
Fixed income (corporate issuers)Not at all
62. What formats of reporting on ESG issue policies, practices or performance have been requested? Please check all that apply.Integrated with regular financial reports,Standalone corporate social responsibility or sustainability reporting,Global Reporting Initiative (GRI),Carbon Disclosure Project (CDP),Other (please specify): 'Supply Chain Codes, Human Rights Policies'
63. To what extent did you or your external engagement service provider(s) or your external investment manager(s) seek information from companies regarding their practices related to norms, standards, codes of conduct or international initiatives related to ESG issues in 2008?
  • Large extent: you or your agents have made a substantial and systematic effort to seek information from companies regarding their participation in and compliance with a number of relevant norms, standards and codes.
  • Moderate extent: you or your agents have made a significant effort to seek information from companies regarding their participation in and compliance with at least some relevant norms, standards and codes.
  • Small extent: you or your agents have requested information from some companies but this has been undertaken in an ad hoc manner.
To a large extent
64. Please add any overall comments and clarifications related to Principle 3 here. Please also describe any significant activities relating to Principle 3 that have not been captured by the questions above.In 2008 we once again co-sponsored the CDP Canada report, prepared by The Conference Board of Canada. Our Vice President of Sustainability, Bob Walker, was a panelist at thelaunches in Montreal, Toronto and Vancouver. We expressed support for, and added our insights to, the initiative of the Ontario Securities Commission to examine the state of compulsory disclosure on environmental risks. We were among a group of institutional investors asked to provide input on the Canadian Institute of Chartered Accountants' (CICA) guidance document on integrating climate change-related disclosure in compulsory Management Discussion and Analysis (MD&A) corporate reporting. We supported the Investor Statement on Sustainability Reporting in Emerging Markets, published in June 2008. Currently 27% of large emerging market companies in three key sectors follow GRI guidelines in their public sustainability reporting  we will continue to work collaboratively with other investors to increase this number.
Principle 4
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
65. Please provide a one to two paragraph description of your approach to this Principle.Ethical Funds has integrated ESG into our investment decisions, and promoting the principles of sustainable investing since before the UNPRI was founded. Ethical Funds promotes the UNPRI Principles, and sustainable investing as a whole, through all of our activities. We publish a monthly newsletter for the SRI community, which often features UNPRI activities, share perspectives on ESG with peers through research publications, an annual report, which has been indexed to the UNPRI Principles, by hosting round table discussions and presenting at industry conferences. Ethical Funds takes advantage of investor coalitions to promote ESG considerations to other investors. This year, we held an investor breifing on Risks and Opportunities in the Canadian Oil Sands in partnership with UNPRI and CERES, and later published a research report on the topic, which we have shared with colleagues and made available publicly.
66. Did you consider RI/ESG requirements when searching for and selecting service providers in 2008 when applicable?
Investment consultantYes, all of the time
Proxy voting service providerYes, all of the time
External overlay service providerNot applicable
Investment research providerYes, all of the time
67. Have you included RI/ESG elements in the following?
Investment monitoringYes, all of the time
Incentive structure (internally managed)No
Incentive structure (externally managed)Not applicable
Contractual relationships with external investment managersYes, all of the time
Contractual relationships with other investment related service providersYes, all of the time
68. To what extent did you encourage your eligible service providers to become PRI signatories or consider RI/ESG factors in 2008?

(Service providers include but are not limited to: external investment managers, investment consultants, proxy voting service providers, external engagement service providers, and investment research providers.)

  • Large extent: in 2008 you asked all of your service providers that are not yet PRI signatories if they would sign the PRI or develop RI/ESG capability.
  • Moderate extent: in 2008 you asked some (greater than 40%) of your service providers that are not yet PRI signatories if they would sign the PRI or develop RI/ESG capability.
  • Small extent: in 2008 you asked a few (less than 40%) of your service providers that are not yet PRI signatories if they would sign the PRI or develop RI/ESG capability.
  • Not applicable: only an available option if you have no service providers or if all of your service providers are already PRI signatories or already consider RI/ESG factors.
Not at all
69. To what extent did you encourage your institutional clients to become PRI signatories or consider RI/ESG factors in 2008?
  • Large extent: in 2008 you asked all of your institutional clients that are not yet PRI signatories or don't yet consider RI if they would become PRI signatories or consider RI.
  • Moderate extent: in 2008 you asked some (greater than 40%) of your institutional clients that are not yet PRI signatories or don't yet consider RI if they would become PRI signatories or consider RI factors.
  • Small extent: in 2008 you asked a few (less than 40%) of your institutional clients that are not yet PRI signatories or don't yet consider RI if they would become PRI signatories or consider RI.
  • Not applicable: only an available option if you have no institutional clients or if all of your institutional clients are already PRI signatories or already consider RI/ESG factors.
Not applicable
70. To what extent did you encourage peer organisations to become PRI signatories or consider RI/ESG factors in 2008?
  • Large extent: in 2008 you were an active advocate for RI and the PRI. You may have actively sought to promote RI or the PRI in industry forums or when speaking with the media.
  • Moderate extent: in 2008 when approached, you were an advocate for RI and the PRI. When asked, you may have sought to promote RI or the PRI in industry forums or when asked about RI when speaking with the media.
  • Small extent: in 2008 when approached, you were sometimes an advocate for RI and the PRI. When asked, you might have sought to promote RI or the PRI in industry forums or when asked about RI when speaking with the media, but you many not have encouraged your peers to become PRI signatories or consider RI/ESG factors very often.
To a large extent
71. Have you revisited any relationships with service providers in light of RI/ESG issue-related capabilities?Yes
72. Does your broker evaluation process (which determines how you allocate commissions to brokers) include an ESG component and/or do you have a budget to pay for ESG broker research?Not applicable
73A. What is your total investment research budget (including brokerage commissions intended to recognize research, in the same currency used in Q1)No Answer
73B. what proportion of your total investment research budget is allocated to ESG research (in percent)?No Answer
74. To what extent do you identify ESG issues and suggest them to brokers or other investment research providers for research?
  • Large extent: you have identified specific environmental, social, or governance issues that you would like more research on from your brokers or other research providers. You may have identified specific companies, sectors or themes for research. You may have contacted multiple research sources to indicate your desire to receive this sort of research. You may have asked for mainstream research that incorporates ESG issues.
  • Moderate extent: you may have identified some research providers that can provide you with ESG research and suggested future research ideas. You may not have contacted all of your research providers to request this research.
  • Small extent: you have indicated to your brokers or other investment research providers that you are interested in receiving ESG research.
To a large extent
75. To what extent did you engage in dialogue, lobbying or initiatives pertaining to government policy and/or industry regulations (for example, stock exchanges or accounting standards) related to RI/ESG issues in 2008?
  • Large extent: you may have initiated dialogue on policy initiatives relating to RI/ESG issues or participated extensively in dialogues initiated by others. You may have commented on issues relevant to your domestic market as well as issues relevant to foreign markets.
  • Moderate extent: you participated in some policy initiatives relating to RI/ESG issues. Your engagement may be focused on domestic markets.
  • Small extent: you participated in a few policy initiatives relating to RI/ESG issues when asked to.
To a large extent
76. Please add any overall comments and clarifications related to Principle 4 here. Please also describe any significant activities relating to Principle 4 that have not been captured by the questions above.Some issues go beyond the performance and disclosure of one company. Sometimes a change in the rules is needed to improve disclosure or performance across a whole sector. Therefore Ethical Funds often raises its voice in consultation processes on regulations and standards relating to corporate sustainability. We also work to enhance financial services and securities regulation and protect shareholder rights so that we can do our work more effectively. Results are more likely when many voices join together asking for change, so we participate in a variety of sustainabilityoriented investor coalitions and multi-stakeholder initiatives. Our Government Relations program specifically fed into the Client Relationship Model which was put out by the Investment Industry Regulatory Organization of Canada. Ethical Funds is also a member of the Canadian Coalition for Good Governance and the Social Investment Organization. We have promoted the Principles by integrating a UNPRI index into our Annual Report.
Principle 5
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
77. Please provide a one to two paragraph description of your approach to this Principle.Wherever possible, we seek collaboration: with companies, with other stakeholders, with industry associations, with think tanks and academics. Over time, we have found that we are most effective when we work within broad coalitions of support. There is power in numbers. We also work to enhance financial services and securities regulation and protect shareholder rights so that we can do our work more effectively. Results are more likely when many voices join together asking for change, so we participate in a variety of sustainability oriented investor coalitions and multi-stakeholder initiatives.
78. To what extent did you collaborate with other investors to improve your effectiveness in implementing each of the following Principles?

  • Large extent: you may have initiated one or more collaborative initiatives or industry associations relevant to the principle and adopted a leadership position within established initiatives or associations. You may also have worked actively with a number of other investors on specific issues of relevance to the principle.
  • Moderate extent: you have been an active participant in a number of relevant collaborative initiatives. You may also have undertaken some work with other investors on specific issues of relevance to the principle.
  • Small extent: you may have joined a small number of relevant collaborative initiatives but have not been an active participant in their activities.
Principle 1To a large extent
Principle 2To a large extent
Principle 3To a large extent
Principle 4To a moderate extent
79. How did you use the PRI Engagement Clearinghouse in 2008?

(Please check all that apply.)

Logged in during 2008 to use the Clearinghouse as a learning tool or to keep up to date on ongoing engagements,Led a collaborative engagement and posted it to the Clearinghouse,Planning to log in in 2009
80. Did you participate in any of the following RI/ESG issue-related collaborations and/or associations? For those not listed, please use the "other" field:

(Please check all that apply.)

Carbon Disclosure Project,Extractive Industries Transparency Initiative (EITI),Institutional Investors Group on Climate Change (IIGCC),International Corporate Governance Network (ICGN),Investor Network on Climate Risk (INCR),Regional social investment organisation (for example SIF or UKSIF),Social Investment Research Analyst (SIRAN),United Nations Environmental Program Finance Initiative (UNEP FI),Other (please specify): 'Boreal Leadership Council',Other (please specify): 'Global Reporting Initative Human Rights Working Group',Other (please specify): 'Interfaith Center on Corporate Responsibility',Other (please specify): 'Social Investment Organization',Other (please specify): 'Canadian Boreal Initiative'
82. Please add any overall comments and clarifications related to Principle 5 here. Please also describe any significant activities relating to Principle 5 that have not been captured by the questions above.No Answer
Principle 6
Principle 6: We will each report on our activities and progress towards implementing the Principles.
83. Please provide a one to two paragraph description of your approach to this Principle.Ethical Funds was the first Canadian firm to formally adopt the Eurosif Transparency Guidelines, designed to provide more disclosure and increased accountability by SRI mutual fund companies to their investors. We actively report on all aspects of our Sustainable Investing Program in our annual proxy voting report, investor statements, regulatory reports, fund materials, monthly and quarterly newsletters, website updates, in addition to the specific reports we publish. This year, as part of the Sustainable Investing Program's Annual Report, we have included a UNPRI compliance index. Using the index you can explore how our activities reflect our commitment to the Principles. The report is available at https://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf
84. To what extent did you disclose (privately and/or publicly) your approach to incorporating ESG issues into investment analysis and decision-making processes in 2008?

(If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

  • Large extent: you provided a review of your investment process, highlighting the way in which analysis of ESG issues is integrated into investment decisions. This review was comprehensive (e.g. covered multiple asset classes where relevant) and detailed, subject to the necessity to protect information on proprietary techniques. This review was disclosed publicly and is readily accessible via your website.
  • Moderate extent: you may have prepared a comprehensive and detailed review of your investment process highlighting ESG integration. However, it was not necessarily distributed publicly. Alternatively, your review may have contained gaps either in coverage or in detail.
  • Small extent: you provided only a relatively brief overview of your investment approach and the integration of ESG analysis into decisions.
To a large extent: 'https://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf'
85. How did you disclose your (proxy) voting record in 2008?

(Please select all that apply. If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

Disclosed publicly: 'https://www.ethicalfunds.com/en/Investor/ChangingTheWorld/DifferencesWeMake/MakingGoodCompaniesBetter/Pages/FocusList_2009.aspx'
86. To what extent did you disclose (privately and/or publicly) your RI/ESG issue-related engagement activities, results and progress in 2008?

(If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

  • Large extent: your reporting provided background on the issues at hand, the nature of the engagement and the outcomes. You may have reported the companies that you engaged with and the issues covered with the companies. You may have also covered emerging issues on which you intend to pursue engagement in future. You may have reported publicly on all of your key RI/ESG engagement activities.
  • Moderate extent: you reported on some of your key RI/ESG engagement activities. Your reporting may not have been disclosed publicly.
  • Small extent: you provided an overview of your RI/ESG engagement activities, possibly including some examples.
To a large extent: 'https://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf'
87. Did you disclose (privately and/or publicly) RI/ESG activities, results and progress related to Principle 3, Principle 4 or Principle 5 in 2008?

(If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

Principle 3Yes - to clients or beneficiaries and the publichttps://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf
Principle 4Yes - to clients or beneficiaries and the publichttps://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf
Principle 5Yes - to clients or beneficiaries and the publichttps://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf
88. How would you like to publish your responses to this PRI Reporting and Assessment tool?

(Please check all that apply.)

Please automatically publish our responses to the reporting and assessment tool in full on the PRI website
89. Please add any overall comments and clarifications related to Principle 6 here. Please also describe any significant activities relating to Principle 6 that have not been captured by the questions above.We update the Focus List section of our website with details on each of our coroporate dialogues on a monthly basis. Visit https://www.ethicalfunds.com/en/Investor/ChangingTheWorld/DifferencesWeMake/MakingGoodCompaniesBetter/Pages/FocusList_2009.aspx
Closing Comments
90. Please describe the benefits you have enjoyed as a result of signing the PRI:The PRI allows for global collaboration on sustainable investing issues. In 2008 Ethical Funds worked in collaboration with Ceres and UNPRI to organize an investor breifing for over over 100 investment institutions on oil sands environmental and social risk. We will continue to use this group in seeking collaboration for shareholder action in 2009 to promote more responsible oil sands development.
91. What has your organisation changed as a direct result of becoming a PRI signatory?The UNPRI endorses the principles which have always guided our work. The organization has enabled global collaboration. We have added the UNPRI Index to our Annual Reporting mechanism.
92. Did the financial market turmoil of 2008 cause you to change your approach to the consideration of ESG factors or active ownership? If it did, please explain how.No, Ethical Funds will remain committed to taking action on behalf of its unit holders to improve both corporate environmental, social and governance performance, and financial services standards - as well as constantly seeking to enhance its own expertise and systems. We believe that in these difficult times for our industry, the work Ethical Funds undertakes through our Sustainable Investing Program is more important than ever.
93. What are the top three activities the PRI Secretariat could undertake to enhance and encourage further implementation of the PRI by current and prospective signatories?
1.
2.
3.
94. What are your top three PRI-related goals/priorities for 2009?
1.Environment: As well as engaging oil sands companies on climate risk, we will ask companies in other sectors to work on emissions reduction, including continued dialogue with real estate companies on implementing green building strategies. Ethical Funds will continue to leverage our participation in the Canadian Boreal Initiative to address a range of critical issues facing the Boreal and other endangered ecosystems. We will be engaging oil sands companies on reclamation issues. We will engage banks on integrating forest conservation and biodiversity concerns. We will encourage forestry companies to adopt sustainable forestry practices and push for adoption of the FSC standards; and we will encourage companies in other sectors to adopt sustainable paper and forest products sourcing policies. Safeguarding Water Ethical Funds will be asking oil sands companies to address water use issues and impacts of operations on water quality.
2.Social Human Rights We will participate in the international GRI Human Rights Working Group, which will develop recommendations on how to improve human rights reporting. Eliminating Sweatshop Conditions and Creating Safe and Healthy Workplaces Ethical Funds will continue to ask companies to comply with international labour standards that protect workers' rights and request that companies monitor and report on factory conditions within their supply chain. Respecting Indigenous Rights and Engaging Communities Ethical Funds will support the protection of indigenous people's rights internationally and in North America. In the extractives sector, we will continue to support adoption of free, prior and informed consent as the standard for project development. We will also be asking oil sands companies to address potential for conflict with rights of First Nations and Métis in Alberta and to support comprehensive land use planning.
3.3. Governance Building Transparency Ethical Funds will be asking companies that do not already do so to respond adequately to CDP information requests and to improve CSR reporting. We will be discussing the importance of transparent sustainability reporting and encouraging companies to improve the quality of their disclosure. Compensating Executives Appropriately Curbing excessive executive compensation will remain a priority for Ethical Funds. We will be asking that compensation be linked to positive performance on both financial and non-financial indicators.
95. What were your most significant achievements in 2008 in relation to your implementation of Principles?
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.In 2008 we expanded our analyst team, and brought more of our evaluations work in-house. To support this we launched the Sustainable Investment Management System (SIMS), a comprehensive database integrating evaluations data with shareholder action tracking and portfolio holdings information, allowing for advanced analysis and reporting. This year our analysts completed Corporate Sustainability Scorecards for more than 320 companies. Ethical Funds researches corporate ESG issues to support and enhance its company evaluations, shareholder action and government relations work. We publish a report series,  Sustainability Perspectives , in which we delve into topical sustainability issues and release bench-marking studies of corporate performance. We also organize occasional Round Tables  expert meetings to raise the level of debate and develop our own positions on emerging sustainability issues.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.We encouraged sector-wide adoption and disclosure of procedures for evaluating credit risk associated with climate change among the major Canadian banks, and shared the results of our banking research in our report Credit Risk, Biodiversity, and Climate Change.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.Through dialogue, letters and shareholder resolutions we encouraged several Canadian companies to respond to the Carbon Disclosure Project (CDP) for the first time. These companies include Agrium, Canadian Utilities Limited, Russel Metals and Finning International. Epcor Power agreed to consider CDP in its plans to release a Corporate Sustainability Report in 2009. In 2008 we once again co-sponsored the CDP Canada report, prepared by The Conference Board of Canada. Our Vice President of Sustainability, Bob Walker, was a panellist at the launches in Montreal, Toronto and Vancouver.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.Ethical Funds was named Canada's Sustainable Investment and Banking Leader at the 2008 GLOBE Awards for Environmental Excellence, in recognition of our efforts to make the outcomes of our sustainable investing program relevant to investors. Bob Walker, Ethical Funds Vice-President of Sustainability, was awarded the prestigious SRI Service Award to recognize his outstanding contributions to the socially responsible investment industry. He is the first Canadian to receive this honour. These awards recognize our efforts to advance sustainable investing, and the principles of the UNPRI. We added a UNPRI Principles Index to our Annual Report.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.We continued our collaborative approach in 2008, working with other investors, non-governmental organizations, industry associations, First Nations and governments to address sustainability challenges across entire economic sectors. The impact, scale and pace of development in Alberta's oil sands became a topic of concern among investors globally. Working in collaboration with Ceres and UN Principles for Responsible Investment we briefed over 100 investment institutions on oil sands environmental and social risks, seeking collaboration for shareholder action in 2009 to promote more responsible development in the sector. We shared the questions we will be posing to companies in a report, Unconventional Risks. We continued to participate in the Boreal Leadership Council, and to use this collaboration to enhance our work on biodiversity and indigenous rights.
Principle 6: We will each report on our activities and progress towards implementing the Principles.This year, as part of the Sustainable Investing Program's Annual Report, we have included a UNPRI compliance index. Using the index you can explore how our activities reflect our commitment to the Principles. The report is available at https://www.ethicalfunds.com/SiteCollectionDocuments/docs/SIPreport2008.pdf
96. What were your biggest barriers in 2008 with relation to your implementation of the Principles?
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.Evaluating and engaging companies operating in emerging markets remains one of the biggest challenge for those operating in our industry. Developing meaningful systems and metrics that can be applied to emerging markets companies is something we are constantly working to improve.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.Being an active shareholder presents challenges in instances where our tools are limited, or companies are unresponsive.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.Some companies are still sensitive to revealing too much informatino in the public realm. We strive constantly for progress while recognizing that internal champions need time to gain support, marshal resources, develop policies, and implement management systems. In conducting these dialogues we are trying to change minds and change corporate culture. This takes time and change often comes incrementally. Once companies begin to implement sustainabilityrelated policies, we seek disclosure to get them  on the public record . Once policies are disclosed, companies are more likely to maintain their commitments even if key personnel take on new challenges internally or leave the company altogether. Practice produces cultural change.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.This principle is difficult because while we embrace and promote the Principles of the UNPRI, the diversity in membership leads to challenges. The quality of implementation is varied, and membership and annual participation in the UNPRI can make it difficult to differentiate between types of members. Ethical Funds integrates in-depth ESG evaluation into 100% of our investment making decisions, and we have deep engagement with a large number of companies, which is complemented by leading edge research. We also disclose all of our activities on a monthly and annual basis. These genuine and dedicated efforts of SRI firms have the potential to be lost in a sea of mainstream investors who are doing surface level ESG evaluations and engagement. The main barrier to this principle is the potential for greenwashing in our industry.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.Not all colleagues have exposure to or interest in the same companies. Our portfolio is mainly Canadian companies, and global investors may have limited exposure to many of the companies we engage.
Principle 6: We will each report on our activities and progress towards implementing the Principles.Reporting presents challenges in terms of resources and capacity, however Ethical Funds is committed to transparency and accountability. We believe that our reporting is some of the best in the industry.
97. Please indicate which principle you find the most difficult to implement and the principle you find the least difficult to implement:
Most difficultPrinciple 4
Least difficultPrinciple 1