Ask an Expert: NEI’s Bob Walker

Bob Walker is Vice President, ESG Services, at NEI Investments, one of Canada’s leaders in responsible investing ^{[1], [2]}. With nearly 30 years of experience, he offers a pointed perspective on the value of sustainability. The Works chatted with Bob about investing in responsible companies, the tech sector’s lack of transparency, and why he is hopeful for a sustainable future.

How did you establish yourself in this space?
I was lucky, because I got in at the beginning. I remember going to an early responsible investing (RI) conference and the banner behind the podium had misspelt the word “environment.” We’ve come a long way. After university, I landed a job at a social investment firm during the 1990 recession and I thought sustainability was a really good idea, that it had legs and that it was going to win out in the longer term. Frankly, I’m surprised it’s taken this long to gain prominence in the corporate sphere. It’s been a long haul. But I’m tenacious – you need to be if you want to thrive in this field.

What are some of today’s greatest ESG challenges?
I’ve been discouraged by the lack of sustainability disclosure from small- to mid-cap companies. I side with the Sustainable Stock Exchanges Initiative – they want to make ESG disclosure a listing requirement ­­– a distant target in this financial landscape. Still, I’m optimistic. Take Exxon Mobil: an incredibly controversial company. However, because of activism from NEI and other peers, it has changed its position on climate science, declared support for the Paris Agreement and included a climate expert on its board of directors. These are significant steps, all in the right direction. And we have a mandate to engage companies like that to help them move forward.

What drives companies to be more transparent?
At NEI, when we talk about meaningful change, we mean culture change. For that, you need companies to be encouraged internally by leaders and other employees, and externally by investors and consumers. Government regulation can be effective, but with it sometimes comes vague, boilerplate language.

What crucial information do you look for in sustainability reporting to support RI decision making?
More and more, we’re looking for strategies and business models where ESG issues are central to the mission, vision and operations. We want to see a focus not just on ESG risks, but also on opportunities for creating solutions to tough environmental and social challenges. For example, Suncor has recently published its climate resiliency report describing in detail how it is going to thrive in a low-carbon world. The company has a multi-dimensional strategy that includes a renewable energy portfolio and low-carbon innovation technologies that are reducing the impacts of oil sands extraction. There are very few companies doing that kind of work in such high-impact sectors, and that makes Suncor a global leader in energy. Our hope is that one day, Suncor would be eligible for our Environmental Leaders Fund, which has resource efficiency at the centre of its investment thesis.

The Suncor sustainability report features a stand-alone report on carbon risk called Resilience Through Strategy, the first of its kind in the Canadian oil and gas industry.

Are there any sustainability reporting trends that are making your job more difficult?
A lot of companies are publishing online reports that do not allow for a downloadable, searchable PDF. Ironically, it’s resulted in a younger generation of analysts calling for the publication of old-school documents. Keyword searches help us do our work. We’re looking forward to the day when base metrics can be downloaded onto our database, to reduce grunt work and increase time for analysis.

Despite having access to massive amounts of data, tech companies consistently fail to be transparent on ESG issues. Will this change?
Some tech companies are doing great. But others lag badly and surprisingly. Why aren’t they embracing their Corporate Social Responsibility? I think that because these companies are winning big-time in terms of business success, a culture of arrogance and complacency has taken hold. They know everything. And that can lead to an attitude of entitlement. Our sustainability colleagues in San Francisco face great hurdles when dealing with companies based in Silicon Valley. It may take a scandal to trigger greater disclosure. Or perhaps the U.S. government will seek to dismantle the power of the tech sector, like it did the railroad companies back in the 19th century. I do think current practices among some tech companies are unsustainable. Change here is inevitable.

Can you identify companies that lead or reflect best practices in corporate reporting?
Among the top companies, we’re seeing some cutting-edge programs and policies. In addition to Suncor, I think of Goldcorp and how far they’ve come as leaders in an industry with great challenges. They do a lot of great work concerning human rights and community engagement. This may surprise you, but McDonald’s is also a worthy candidate. They’re trying to move forward on a wide variety of issues: healthier food, supply chain issues, fibre-based packaging, etc.

Which companies have the greatest opportunity to enhance their standing by improving their accountability?
There are many companies across sectors that can benefit from tackling material ESG issues. Openness and collaboration welcomes investment. Back in the day, a lot of companies had no idea what we were talking about in terms of ESG or sustainability. Now we see an emerging consensus around the need to define a company’s purpose beyond providing returns to shareholders. More and more companies are acknowledging their broader social responsibilities and accepting the idea at the core of our responsible investing thesis, which sees the purpose of the corporation as providing a return to all its stakeholders – including shareholders, but also customers, suppliers, employees, communities and future generations. The growing acceptance of stakeholder theory gives me great hope for the future.

[1] Based on the 2015 Canadian Responsible Investment Trends Report, Responsible Investment Association (RIA). The subtotals throughout the report sum to a total that is greater than $1.01 trillion. RIA subtracted overlapped assets from the total to avoid double counting.

[2] Based on Investor Economics data of responsible investment (RI) assets under management (AUM) as of January 2016, which totals $7.7B. NEI Investments manages in excess of 50% of the total RI assets within the Canadian retail mutual fund industry. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Ethical Funds and NEI Investments are registered marks and trademarks owned by Northwest & Ethical Investments L.P.