TRENDS IN CORPORATE ENGAGEMENT

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TRENDS IN CORPORATE ENGAGEMENT PROJECT-BASED
APPROACH, BEST PRACTICE FOCUSED THREE CASES IN
THE PIPELINE
Lise Parent - Analyste-conseil Responsabilité
sociale et durabilité Regroupement pour la
responsabilité sociale et léquité
(RRSE) parcohen_at_sympatico.ca
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Agenda

• The RRSE in a nutshell
• Project-based Approach what it consists of
  why we use it examples from projects in the
  pipeline
• Best-practices focused what it consists of
  why we use it how it is defined interrelation
  of BP examples from projects in the pipeline
• Risks linked to outdated practices
• Conclusion advantages of a project-based,
  best- practice focused approach

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The RRSE in a nutshell

• Founded by institutional investors from religious
  communities open to other ethical shareholders
• 2) Independent from any public, corporate or NGO
  funding
• 3) Researching material information not included
  in financial reports under current practices, in
  order to advise its members in the performance of
  their duties as portfolio managers or shareholders

• Develop corporate engagement program for its
  members
• Focused on social justice and the integration of
  environmental, social and governance (ESG)
  factors in the management of business enterprises

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Why Project-based (vs global) approach?
A global approach is focused on a portfolio,
while a single project illustrates how risks and
opportunities are linked to practices applied
daily in search of development. It involves

• People in their daily life whether opposed to or
  in favour of the project, and illustrates on
  what basis a social license to operate can be
  obtained
• Competition for resources (water, land, minerals,
  forest) and how conflict over resources may be
  resolved
• The environment, and illustrates the dependency
  of people and resources on sustainable
  development
• Disclosure rules and transparency to shareholders
  concerned with risk management

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What projects do we choose and how?

• Projects identified by our religious members
  missions compared to information from stock
  analysts, NGOs and newspapers for "information
  triangulation"
• - Magnitude of the project VS the Company
  portfolio
• - Disclosure of information on risks and
  obligations by the Company (Management
  Discussion Analysis MDA section and
  Financial Statements - Asset Retirement
  Obligations ARO)
• Distinctiveness of issues working conditions,
  engagement and partnership, water, global
  warming, indigenous land, etc.
• Risks involved project cancellation, on-going
  controversy, economic, environmental and social
  impacts of accident or mishap

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Example - Three cases in the pipeline
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Three cases in the pipeline (continued)
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Best-practices focused - What are BP?

• Best practices are policies, guidelines,
  standards, rules, programs, initiatives or
  activities which are considered leading edge. A
  commitment to using best practices in any field
  is a commitment to using all knowledge, standards
  and technology available to ensure a project
  sustainability and success.
• Best practices are not localized but universal
  a form of auto-regulation the alternative would
  be international regulation
• Generally speaking, BP apply to the assessment
  of a projects economic, social and
  environmental impacts, the adjustment of the
  project design to minimize negative impacts, and
  the disclosure and mitigation of or compensation
  for any residual impacts.

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Why Best-practice focused?

• Ongoing adherence to best practices assure that
  there are no double standards, for instance a
  set of practices in the OECD countries, and
  another set for developing countries.
• From a shareholder standpoint, BP ensure that
  stakeholders (including shareholders) will not
  have to support risks in one country they would
  not support in another country. (Ex., DRC vs
  Canada in same portfolio)
• Best practices are precautionary although their
  application may not be regulated, they are not
  optional for enterprises committed to CSR as
  they ensure the best of risk management, from a
  social, environmental and economic point of
  view.

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How are best practices defined?
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How are best practices defined? (continued)

• Interrelation of best practices
• Ex. International Cyanide Management Code (ICMM
  UNEP)
• Transportation, usage and storage of cyanide
  during operations
• No standards on mining effluents,
  design/construction of tailings impoundments
  or closure and long-term rehabilitation
• Not sufficient to adhere to the ICMC. Latest
  standards on mining effluents, design, project
  insurance to be in place to.
• Best practices are interrelated to better manage
  risks which evolve with technologies and
  global public scrutiny
• THE CHALLENGE FOR INVESTORS IS TO IMPLEMENT A
  MULTIPRACTICES EVALUATION APPROACH

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Example - Two cases in the pipeline
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Two cases in the pipeline (continued)
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Two cases in the pipeline (continued)
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Corporate engagement program

• Two modes (private vs public) in four phases
  Dialogue, Partnering, Intervention and Follow-up
• Dialogue is private and consists of letters to
  and meetings/ conference with management and
  Board as well as fostering awareness of other
  shareholders
• Partnering is private and consists in
  developing enduring partnership with experts and
  other shareholders for multilateral engagement
• Intervention is public and consists of
  questions at AGM, filing of proposals, press
  releases and coalitions

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Risks linked to double standards or outdated
practices

• Enduring opposition or controversy leading to
  delays, confrontation, additional costs,
  withdrawal, etc.
• Global reputation financing and insurance
  costs, stock valuation
• Local regulation changes La Rioja Province
  (Argentina), Peru Yanacocha (no water base
  line data) fed by anti- mining sentiment
• People are more and more knowledgeable about
  international standards and practices and want
  to be treated no differently than Canadians or
  Americans

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Conclusion advantages of a project-based,
best-practices focused approach

• Concrete illustration of best practices re
  social and environmental impacts, of risks
  linked to obsolete practices and governance, and
  how practices and risks are interrelated in
  real life and for responsible long-term
  investment
• Lead to multipractice evaluation which allows
  us to

• Get support from experts in their own field
  (single project single technical issue
  conceptual design, hydrology, geochemistry,
  etc.)
• Get support from other institutional
  investors (multifactor research supported by
  technical experts)