Commitment to the UK Stewardship Code - RBC Global Asset Management | 2020 - I Financial ...
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Commitment to the UK Stewardship Code RBC Global Asset Management | 2020
2 Table of contents Principle 1 3 Principle 2 7 Principle 3 11 Principle 4 13 Principle 5 17 Principle 6 19 Principle 7 22 Principle 8 25 Principle 9 27 Principle 10 29 Principle 11 30 Principle 12 32
RBC GAM Commitment to the UK Stewardship Code 2020 3
Purpose & governance
Principle 1
Signatories’ purpose, investment beliefs, strategy, and culture enable stewardship
that creates long-term value for clients and beneficiaries leading to sustainable
benefits for the economy, the environment and society.
Our purpose
RBC Global Asset Management (RBC GAM)1 is the asset management division of Royal Bank of Canada (RBC). We provide a
comprehensive range of investment solutions for investors around the world. Our purpose is to deliver exceptional investment
outcomes and valued insights to clients, and our principal duty is to maximize investment returns for our clients without undue
risk of loss. We do this within the investment limits described in each investment mandate. We believe that being an active,
engaged, and responsible owner empowers us to enhance the long-term risk-adjusted performance of our portfolios.
Our purpose inspires everything we do and drives our four core values:
Client first A culture of excellence Global expertise Power of
Put our clients’ interests first Foster a strong culture of Offer expansive global capabilities human + machine
collaboration and diversity and a diversified breadth Embrace innovation and
of investment solutions harness the power of
human and machine
The culture at RBC GAM demands excellence in client servicing, investment management, and risk management. We are
committed to leveraging the discipline of our investment teams across the globe to bring our clients a breadth of quality
investment solutions. We believe that a combination of human and machine is more powerful than either on its own.
Integrating advanced investment and risk management tools allows us to extend our field of analysis, reinforces discipline, limits
behavioural finance challenges, and bolsters results – ultimately leading to better decisions and more efficient portfolios. We also
believe that proper disclosure and consideration of environmental, social, and governance (ESG) risks and opportunities by the
companies and countries in which we are invested will enhance the long-term risk-adjusted performance of those investments.
Our responsible investment (RI) strategy and beliefs build on each of these values, and are driven first and foremost by our
duty to our clients.
1
I n this document, references to RBC GAM include the following affiliates: RBC Global Asset Management Inc., RBC Global Asset Management (U.S.) Inc.,
RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) , and BlueBay Asset Management (LLP), which are separate, but affiliated
subsidiaries of RBC. BlueBay also intends to publish its own UK Stewardship Code 2020 statement by March 31, 2021.
RBC GAM Commitment to the UK Stewardship Code 2020 4
Our responsible investment strategy & beliefs
Our approach to responsible investment is anchored by the knowledge that our clients have entrusted us to help them secure
a better financial future for themselves or for the beneficiaries of the funds they manage. As stewards of our clients’ assets,
we are committed to ensuring that the issuers in which we invest act in alignment with the long-term interests of our clients.
At RBC GAM, we believe that: Stewardship and engagement on material ESG considerations
are important components of our investment philosophy.
§ B
eing an active, engaged, and responsible owner empowers
By acting as an active, engaged and responsible investment
us to enhance the long-term, risk-adjusted performance
manager, we are better equipped to deliver exceptional
of our portfolios and is part of our fiduciary duty.
long-term outcomes for our clients. Our investment teams are
§ I ssuers that manage their material ESG risks and always exploring new and better ways to integrate material
opportunities effectively are more likely to outperform ESG factors into the investment process. Therefore, we ensure
on a risk-adjusted basis, over the long term. investment teams have access to ESG integration tools. Above
§ E
ngagement through private dialogue is often effective all, our Chief Executive Officer (CEO) and Chief Investment
at facilitating change. Officer (CIO) have made stewardship and ESG integration
firm-wide strategic priorities throughout our investments as
§ I nitiatives that increase transparency and foster fair and
well as our operations. In Principle 2, we describe how our
efficient markets benefit all investors and clients globally.
governance structure promotes these beliefs and values
§ C
ollaboration with like-minded investors may give us greater throughout the firm.
influence on issues that are material to our investments.
RBC GAM Commitment to the UK Stewardship Code 2020 5
Our approach to responsible investment is comprised of three pillars that set out these beliefs. Each of the specific actions
we take under each of these pillars is aimed to deliver on our duty of maximizing our clients’ investment returns without undue
risk of loss.
Fully integrated ESG Active stewardship Client-driven solutions and reporting
All investment teams integrate We convey our views through thoughtful We align our solutions with client
relevant ESG factors into their proxy voting, engagement with issuers and demand and provide transparent
investment processes. regulatory bodies, and collaboration with and meaningful reporting.
other like-minded investors.
Fully integrated ESG means that every Active stewardship means that we Client-driven solutions and reporting
investment team evaluates ESG factors convey our views through thoughtful means that we align our solutions
as a part of its investment decision- proxy voting, engagement with with client demand and provide
making process. Our approach to issuers and regulatory bodies, and transparent and meaningful reporting.
ESG integration is investment-led, collaboration with other like-minded Transparency and accountability is key
focuses on materiality, promotes investors. As stewards of our clients’ to maintaining meaningful relationships
transparency and accountability, and assets, we are committed to ensuring with our clients and delivering on our
continuously improves and innovates. that the issuers in which we invest fiduciary duty. Therefore, we tailor our
Each year, we document the specific act in alignment with the long-term reporting to clients based on what is
ESG integration tools and processes interests of our clients. We convey our most meaningful, across asset classes
that each investment team uses to views on topics deemed material for and regions. As our clients’ needs
ensure that they are aligned with RBC the specific investments or portfolios, evolve, we are continuously improving
GAM’s overall beliefs and strategy, and including board structure, executive our reporting and product solutions
to identify any further challenges or compensation, diversity and inclusion, to meet those needs. For example,
improvements that could complement and climate change, in an effort to in 2020, we updated our Approach to
teams’ specific investment strategies. effect change and enable better long- Responsible Investment to include more
This ensures that the integration term, risk-adjusted outcomes for our details on our ESG integration across
of ESG factors enables effective clients and their beneficiaries. Results asset classes. We also released our
stewardship and ultimately adds from our proxy voting and engagement updated Approach to Climate Change,
value to clients and beneficiaries. activities are regularly shared with recognizing the material risks and
clients and our proxy voting guidelines opportunities that climate change
are updated on an annual basis to presents across the investments
ensure that we continue be effective we manage.
in our stewardship.
RBC GAM Commitment to the UK Stewardship Code 2020 6
Measuring success
RBC GAM’s purpose is to deliver exceptional A+ Strategy & Governance
investment outcomes and valued insights Listed Equity - Incorporation
to our clients. We measure our performance A
Listed Equity - Active Ownership
against the specific investment goals of our B
clients and the investment mandates that we Fixed Income - Sovereign/Supranational/Agency
C
manage on their behalf. We also track client Fixed Income - Corporate Financial
satisfaction to ensure that we are effective D Fixed Income - Corporate Non-Financial
in serving our clients’ best interests, and
E RBC GAM’s score
we continuously evolve our responsible
2020 Peer median
investment activities accordingly.
In addition, continuous improvement and innovation is core to how we do business. Every year, as a signatory to the UN
Principles for Responsible Investment (PRI), we file our PRI Transparency Report. The PRI assesses all signatories’ approaches
to the Principles, and in 2020 we were encouraged to receive the highest grades, with each module receiving a score of A+. 2
Furthermore, BlueBay Asset Management (BlueBay) was selected as one of five shortlisted nominees among 120 entries
for the ESG Incorporation Initiative of the Year Award by the PRI for BlueBay’s work establishing its innovative issuer ESG
evaluation framework.
2
As part of the paid annual membership services, the PRI evaluates signatories’ approaches to the Principles based on its assessment methodology. Once the
responses are assessed, all indicator scores are aggregated and assigned a performance band (from A+ down to E). Our full transparency report as one of over 2,000
signatories can be found here: RBC GAM PRI Transparency Report.
RBC GAM Commitment to the UK Stewardship Code 2020 7
Principle 2
Signatories’ governance, resources and incentives support stewardship.
Governance of Responsible Investment at RBC GAM Responsibility for strategic initiatives is delegated to the
RBC GAM’s Approach to Responsible Investment is the formal appropriate executives, whose direct annual compensation
policy document that governs the firm’s responsible investment includes an assessment of performance on those initiatives.
and stewardship activities. The policy is reviewed on an annual In addition, performance on strategic initiatives can also
basis, with input on any changes provided by the RBC GAM contribute to the overall firm-level performance factor that
Leadership Committee (Leadership Committee) and ultimate is applied to all employees’ annual variable compensation
approval by RBC GAM’s CIO. amount. Oversight of performance on these initiatives
ultimately lies with the CIO, CEO, and relevant Boards of
The policy applies firm-wide, and the governance structure Directors, and is measured both quarterly and annually.
of the specific activities encompassed by the policy can be The combination of executive oversight and responsibility over
summarized per the below chart. Day-to-day implementation these initiatives ensures that responsible investment and
of the policy and responsible investment activities is primarily stewardship is effectively executed and continuously improves.
conducted by our Corporate Governance and Responsible
Investment (CGRI) team and investment teams. This governance We believe that having a diverse workforce fosters innovation
structure was chosen to ensure that the level of oversight of and leads to higher engagement and team morale. As a result, we
responsible investment and stewardship is commensurate have developed a Global Diversity and Inclusion Plan to address
with its importance to RBC GAM’s overall business strategy. near- and long-term objectives of recruiting a diverse workforce,
For example, every year, the RBC GAM Leadership Committee development and retention of top talent, and engagement of
sets strategic objectives for the entire firm, which are formally our employees to create and inclusive work environment
approved by RBC GAM’s CIO and CEO. For the past two through internal and external events and partnerships.
years, these objectives have included specific responsible
investment priorities.
Oversight
Relevant Boards of Directors3
§ Oversee strategy and direction
Approval & oversight
Chief Executive Officer (CEO)
§ Sets strategic direction of RBC GAM
§ Oversees performance of all RBC GAM strategic initiatives
Chief Investment Officer (CIO)
Feedback & expertise
§ Oversees performance of investment strategies
§ Oversees and approves RI and ESG initiatives Leadership Committee
Liaise
with product § Comprised of CEO, CIO,
Implementation
development, and leaders across RBC GAM
clients, industry CGRI Team Investment Teams business (including CGRI
associations, § Leads RI strategies and § Execute ESG and investment teams)
and other RI initiatives across firm integration activities § Provides direction for
stakeholders § Executes proxy § Engage with investees RI strategies
as needed. voting activities on material ESG issues § Receives updates on execution
§ Liaises with § Participate in education of RI strategies
industry affiliations sessions, monthly calls
§ Maintains subject and ongoing development
matter expertise activities on material
§ Supports ESG integration ESG trends and topics
and active stewardship
activities
3
RBC Global Asset Management Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (Asia)
Limited and BlueBay Asset Management (LLP).
RBC GAM Commitment to the UK Stewardship Code 2020 8
RBC GAM has dedicated considerable resources to enable § E
xecuting and managing RBC GAM’s proxy voting activities,
accountability for effective stewardship throughout the including voting proxies and leading the annual review and
organization. The day-to-day implementation of responsible update of the RBC GAM Proxy Voting Guidelines. This function
investment and stewardship activities is shared between is centralized, as we believe that the principles we apply
RBC GAM’s centralized CGRI team and our various in proxy voting are in the best interests of all shareholders
investment teams. and clients invested in the portfolio companies. Therefore,
RBC GAM votes the same across all internally-managed
Corporate Governance & funds, according to our custom RBC GAM Proxy Voting
Responsible Investment (CGRI) Team Guidelines . The CGRI team reviews each vote individually
The CGRI team is comprised of six dedicated full-time and seeks input from investment teams on specific issues,
employees who sit within the investment platform. CGRI to ensure voting reflects the best interest of our clients
team members have a mix of investment, ESG, and legal in both systemic and company-specific matters.
expertise, and team members’ individual compensation is
§ L
eading collaborative initiatives with like-minded investors
entirely related to RBC GAM’s responsible investment and
and national or international organizations/coalitions
stewardship activities. The Head of Corporate Governance
on ESG-related issues, where appropriate. The team also
and Responsible Investment also sits on the Leadership
supports the direct engagement program by liaising
Committee and reports directly to the CIO.
with investee companies and investment teams,
As a centralized function, the CGRI team’s primary where appropriate.
responsibility is to lead responsible investment and § M
aintaining a high level of expertise on material and
stewardship across the firm. This includes:
emerging ESG trends, and preparing client reporting
§ Developing cohesive RI strategies and policies for Leadership
and thought leadership pieces related to RBC GAM’s
Committee approval, including the Approach to Responsible
RI activities and insights.
Investment, Approach to Climate Change, and Proxy
Voting Guidelines. As part of the CGRI team’s continued efforts to expand
internal subject matter expertise on material ESG topics,
§ S
upporting the ESG integration of RBC GAM’s investment
the CGRI team rolls out internally developed ESG factsheets
teams, including by providing ESG-related research
and research to investment teams on regular basis. Research
and education, maintaining vendor relationships, and
in 2020 included human rights, Indigenous rights, cyber
updating teams on new tools, evolving trends, and best
security and data privacy, climate change, and water risk
practices regarding ESG integration. The CGRI team also
management. In addition, the CGRI team hosted a Climate
conducts the annual review of ESG integration processes
Change Education Series which featured insights, trends and
across investment teams and supports the continuous
data from industry experts. Finally, the CGRI team distributes
improvement of practices and technology.
a monthly newsletter internally to keep our investment and
distribution teams up to date on new developments in
RBC GAM Commitment to the UK Stewardship Code 2020 9
stewardship activities and responsible investment. Other resources
Investment teams RBC GAM has also engaged a number of external research
firms to provide specialized ESG research that we use in
RBC GAM is comprised of 23 investment teams, each
conjunction with other forms of analysis to assist in our
managing its specific investment processes and mandates.
stewardship and other ESG initiatives. This research includes
Teams include 158 portfolio managers with an average of
ESG risks and opportunities relevant to specific issues,
19 years of industry experience, supported by 102 analysts
country- and industry-specific information, and broad-
with an average of 13 years of industry experience. 47% of
based thematic data relevant to general ESG themes.
these individuals are Chartered Financial Analysts, and
several more are candidates.4 The providers we use for ESG-related tools
and research include:
Investment teams regularly participate in ESG-specific
§ MSCI ESG
education on topics such as climate-related risks and
opportunities, executive compensation, and global supply § Sustainalytics
chain risk management. Each investment team has an § TruValue Labs
ESG Champion who participates in monthly calls with
§ Institutional Shareholder Services (ISS)
other ESG Champions, portfolio managers and CGRI team
members to share and discuss the latest ESG trends, tools § Glass, Lewis & Co.
and processes. Topics in 2020 included ESG integration in the § CDP, formerly known as the Carbon Disclosure Project
time of COVID-19, climate data integration, ESG & technology,
§ Bloomberg
and investor perspectives on human rights, among others.
§ RepRisk
Since investment teams directly buy, sell, and manage
§ Verisk Maplecroft
investments on behalf of our clients, they are best equipped
to integrate ESG and stewardship considerations within these § Eurasia Group
investment processes. This ensures that stewardship activities
add value to and complement the unique investment processes
of each investment team. Managers and analysts are regularly
evaluated on their teams’ integration processes, including as
one component of their annual variable compensation.
Specific RI responsibilities of investment teams include:
§ Integrating ESG factors into their investment processes in
a way that adds value to their unique strategies, including
by evaluating the material ESG risks and opportunities
embedded within each investment and continually
increasing their knowledge of material ESG topics.
§ E
ngaging with investee issuers on material ESG issues,
where appropriate, and tracking the frequency and
outcomes of these engagements on a best-efforts basis.
§ W
here appropriate, assisting with client reporting on
RI activities, including updates to their ESG integration
processes, engagement case studies, and team insights
on emerging ESG topics and trends within their specific
investment universes.
4
As at December 31, 2020.
RBC GAM Commitment to the UK Stewardship Code 2020 10
Our investment teams use ESG research providers’ reports Improving our governance processes
to assist in their proprietary research of companies when We have established an effective governance structure
making investment decisions and/or prior to engagement, and processes to support our stewardship activities. Our
to better understand the industry landscape and individual integrated approach of upper-level management involvement
company activities. Some teams also integrate ESG data in our firm-wide ESG goals creates a culture supportive of
from our vendors directly into their investment processes. and accountable to our stewardship efforts. We believe that
we have the most effective governance structure in place for
RBC GAM also subscribes to the proxy voting research of
our organization, however we are always finding ways
both ISS and Glass, Lewis & Co. The research and benchmark
to improve our systems and processes.
policy voting recommendations from both proxy advisors are
considered as part of the proxy voting decision. However, Throughout 2020, we continued to enhance our ESG
the final voting decision is independent and voting authority risk management processes. Specifically, we undertook
rests solely with RBC GAM. We retain the services of ISS to climate scenario analysis and introduced new climate risk
execute our proxy votes, once RBC GAM makes our voting measurement tools, directly integrated in our Investment
decisions, based on the RBC GAM Proxy Voting Guidelines Risk team and our governance process. Our primary ESG
and case-specific analysis. risk management tool will continue to be ESG integration
at the investment level; however, we believe that these
For more information on how we manage and monitor our
enhancements at the firm level will also complement
external service providers, please see Principle 8. For more
and enhance our risk management as our understanding
information on our proxy voting process and results, please
of these issues evolves.
see Principle 12.RBC GAM Commitment to the UK Stewardship Code 2020 11
Principle 3
Signatories manage conflicts of interest to put the best interests of clients
and beneficiaries first.
Our conflict of interest policies For example, as a bank-owned asset manager, RBC GAM is
As institutional investment managers, we have a fiduciary duty in a conflict of interest position when it exercises its annual
to act in the best interests of our clients which includes having proxy voting rights for Royal Bank of Canada (RBC) shares.
robust policies and procedures to prevent and/or appropriately For Canadian funds, all proxy voting decisions related to RBC
manage conflicts of interest. Our conflict of interest policies shares are approved by the CIO and RBC GAM’s Independent
establish the standards that must be followed by RBC GAM Review Committee (“IRC”). The IRC is required by securities
to ensure compliance with all applicable securities laws and regulation in Canada to oversee all conflict of interest
regulations of the jurisdictions in which we operate. matters, including proxy voting.
Our conflict of interest policies cover all potential conflicts Another example of a conflict of interest results from RBC GAM’s
that may arise, including conflicts relating to the bank-owned strategic alliance with BlackRock Asset Management Canada
structure of RBC GAM, personal trading, payments, gifts and Limited (“BlackRock Canada”). To address this conflict,
entertainment, external directorships/outside activities, proxy when RBC GAM exercises its voting rights at a BlackRock
voting and engagement. Our policies recognize that a conflict Inc.’s annual general meeting, the investment teams are
of interest arises when the interests of an individual or the recused from the voting decisions and the CGRI team makes
firm are inconsistent with the interests of a client, including recommendations to the Proxy Voting Committee directly. The
an investment fund unitholder, or when there is a conflict Proxy Voting Committee makes the proxy voting decision in an
between the interests of different clients. We consider independent manner and in the best interests of our clients.
conflicts of interest to include actual conflicts, potential
conflicts where there is a reasonable probability that an Proxy voting and engagement
actual conflict will arise, and perceived conflicts where the Our conflict of interest policies prohibit any undue influence
perceived conflict could cause reputational damage to RBC GAM. being exerted on our proxy voting and engagement activities
from RBC or any other issuer that might have a relationship
RBC GAM’s policies require the firm to: with RBC or any of its affiliates, which helps to avoid any
1. establish appropriate controls and processes to identify actual or potential conflict of interest. RBC GAM has its
conflicts of interest and either eliminate or satisfactorily own policies and procedures relating to proxy voting and
manage them; engagement and is typically not aware when an issuer has
2. train employees on conflicts of interest and provide a relationship with RBC or its affiliates. In addition, potential
support in conflict of interest identification; and conflicts of interest are significantly reduced due to our
centralized proxy voting, which is administered and overseen
3. maintain records of identified conflicts of interest.
by the CGRI team in accordance with the RBC GAM Proxy
RBC GAM does not make its compliance policies publicly Voting Guidelines.
available, but does disclose its conflict of interest policies
and practices to clients in accordance with the securities RBC GAM has a Proxy Voting Committee, which includes
laws and regulations in the jurisdictions in which it operates. the CIO. The following issues are escalated to the Proxy
Voting Committee when they occur:
Addressing potential conflicts § instances where RBC GAM believes it is in the best interests
At RBC GAM, we maintain a Conflicts of Interest Identification of a client to deviate from the recommendation made by
Policy and Procedures document, which is updated annually our service provider based on the RBC GAM Proxy Voting
and includes a “Conflict of Interest Register.” This register Guidelines because 1) we believe that those guidelines
is comprised of a description of each potential conflict have been misinterpreted or misapplied; or 2) we believe
identified. All potential or actual conflicts of interest, that the unique circumstances of the company warrants
including ones related to proxy voting and engagement, a different approach;
have been addressed by putting appropriate controls
and policies in place.RBC GAM Commitment to the UK Stewardship Code 2020 12
§ i nstances where our proxy voting may give rise to an actual concerning that proxy voting matter. In the rare event that
or perceived conflict of interest; and all members of the Proxy Voting Committee are aware of a
conflict of interest, the CIO will make all decisions concerning
§ u
nusual circumstances regarding corporate action items.
the exercise of proxy voting rights in the best interests of our
We generally vote all corporate action items, including those
clients. The CIO is ultimately responsible to the CEO for the
relating to mergers and acquisitions, in consultation with
manner in which the proxy voting rights are exercised.
our investment teams. However, in the event of unusual
circumstances or a difference of opinion between individual Similar principles are applied with respect to engagement with
investment teams on how to vote a particular proxy, we the companies in which we are invested. As noted above, RBC
escalate the matter to the Proxy Voting Committee. GAM is typically unaware of any relationship RBC may have
Proxy voting decisions are made by the Proxy Voting with an issuer, which helps to avoid any actual or potential
Committee based on a review of the voting matter with conflict of interest when we set our engagement priorities. Our
portfolio managers and if the CIO deems it necessary, engagement priorities and activities are undertaken based
with the CEO. solely on what we determine is in our clients’ best interests,
unaffected by any other considerations. Any attempts to
If any member of the Proxy Voting Committee is aware of a influence our engagement priorities or activities would be
possible conflict of interest related to himself or herself and immediately reported to our CIO.
the exercise of the proxy voting rights, that member will recuse
himself or herself from any discussions or decision-makingRBC GAM Commitment to the UK Stewardship Code 2020 13
Principle 4
Signatories identify and respond to market-wide and systematic risks to promote
a well-functioning financial system.
RBC GAM risk oversight Using active stewardship to address systemic risk
At RBC GAM, our Investment Risk team is responsible for Active stewardship is a core pillar of our approach to responsible
maintaining a risk register of the most material risks facing the investment. We convey our views through thoughtful proxy
sum of all our investments across all mandates. These risks are voting, engagement with issuers and regulatory bodies, and
isolated and monitored by our Investment Risk team, are collaboration with other like-minded investors. With regards
reviewed on monthly basis by the RBC GAM Investment Risk to systemic risks, we manage and respond to these risks by
Committee (GIRC), and are monitored on a regular basis exerting our influence with a combination of all three
through consultations between the CIO and the Head of of these approaches.
Investment Risk. There risks include both market-wide risks,
such as geopolitical issues and currency rates, and certain Engaging with regulatory bodies, individually as a firm
or collaboratively with like-minded investors, is a critical
systemic risks like climate change.
component of our stewardship activities to address systemic
These risks are managed in two ways: risks and promote well-functioning markets. In 2020, we shared
our views on several proposals with regulators and other
1. For quantifiable market factors like currency and
policymakers. For instance, in Canada, we collaborated
concentration risks, limits may be implemented on each
with other Canadian investors as part of the Ontario Capital
investment mandate’s allowable exposure to those factors.
Markets Modernization Taskforce, which included feedback
These limits vary with the strategies’ investment goals,
on recommendations related to ESG disclosures and ESG
risk tolerance, and benchmark. They are monitored daily
investing, and as part of a session with the Responsible
by internal systems and reviewed at least quarterly by the
Business Practices Division at Global Affairs Canada, which
regional Investment Risk Oversight Committees, which
explored solutions and measures that could help position
include the Director of Investment Risk and Performance,
Canadian companies as global leaders in responsible and
the CEO, and the Head of Equity Trading, among others.
sustainable business conduct. In the U.S., we submitted
2. For systemic risks that relate to the functioning of financial comments to the U.S. Department of Labor on two of its
markets, such as transparency, corruption, and climate notices of proposed rulemaking entitled “Financial Factors in
change, we use active stewardship programs, like direct Selecting Plan Investments” and “Fiduciary Duties Regarding
and collaborative engagement and proxy voting, to convey Proxy Voting and Shareholder Rights”, specifically on the
our views and influence outcomes, where appropriate. proposals’ references to ESG integration, proxy voting, and
shareholder rights. We believe our comments, engagements,
and letters are having a positive impact and contributing to
promoting efficient capital markets.RBC GAM Commitment to the UK Stewardship Code 2020 14
Our approach to responding to, managing, and influencing systemic outcomes
related to climate change5
PROXY VOTING COLLABORATION WITH LIKE-MINDED INVESTORS
We conduct thoughtful proxy voting on climate- We support climate change engagements and
related shareholder proposals and generally support disclosure through collaborative initiatives, including:
proposals requesting: § S
ignatory to the Climate Action 100+, focusing on
§ T
hat a company disclose information on the risks climate active engagement with the world’s largest publicly
change may pose to its operations and investments, or traded and systemically important carbon emitters,
on how the company identifies, measures, and manages or companies with significant opportunity to drive
such risks. Risks include Transition Risks and Physical the transition to a low-carbon economy. In 2020,
Risks, as defined by the Task Force on Climate-related we participated in four engagements
Financial Disclosures (TCFD) § S
upporter of the TCFD, which aims to improve
§ T
hat a company adopt initiatives to reduce the emission disclosure of climate-related risks and opportunities.
of greenhouse gases,including carbon, and detailed We encourage TCFD disclosures from issuers and are
disclosure of progress preparing our own TCFD disclosures
§ T
hat a company disclose the results of climate change § M
ember of the Environmental and Social Committee
scenario analyses and other climate change-related and the Policy Committee of the Canadian Coalition
considerations for Good Governance
§ T
hat a company consider the recommendations § S
ignatory to the CDP, formerly known as the Carbon
of the TCFD in its disclosure to shareholders6 Disclosure Project, which enables entities to measure
and manage their environmental impacts and strives
ENGAGEMENT to advance environmental disclosure
We actively engage with companies and regulators,
For more information on our collaborative engagements,
where appropriate, to encourage climate mitigation
please see Principle 11.
and adaptation, and report on our activities and
outcomes. For example, in 2020, a few of our climate-
related engagement topics included:
§ E
ngagement on companies’ climate-related risks and
opportunities, and greenhouse gas (GHG) emission
reduction targets
§ E
ngagement on insurance companies’ underwriting
process given increasing severity and frequency of
climate change-related weather events
§ E
ngagement on companies’ green bond frameworks,
including use of proceeds and climate-related targets
For more information on our direct engagement
activities, see Principle 10.
5
Please refer to our Approach to Climate Change for more information.
6
For more information, see our Proxy Voting GuidelinesRBC GAM Commitment to the UK Stewardship Code 2020 15
Summary of our industry initiatives
As long-term investors and stewards of our clients’ assets, we participate in industry initiatives that will increase transparency,
protect investors, and foster fair and efficient capital markets. Highlights of our participation in 2020 are as follows:
Initiative Description 2020 Highlights
30% Club Canadian Investor Group The 30% Club Canada has instigated numerous engagements, of
which RBC GAM is currently the co-lead on three. We also updated
RBC GAM is signatory to the 30% Club Canada, a
our Proxy Voting Guidelines in 2020 to vote against certain directors
coalition of Canada’s largest institutional investors
at companies with less than 25% women on the board. Additional
that aims to achieve minimum 30% women on boards
updates were made in 2021 to update this requirement to 30%.
and in senior management of S&P/TSX Composite
Index companies by 2022. In 2020, we voted against 1,198 directors at companies where the
board failed to meet our 25% threshold. (this represented 52% of
our votes against directors).
Canadian Coalition for Good Governance (CCGG) In 2020, our Head of CGRI continued to serve as a member of the
Policy Committee, and another member of the CGRI team joined
RBC GAM is a member of CCGG, which promotes good
the Environmental and Social Committee. CCGG completed 33
governance practices in Canadian public companies
company engagements and 8 policy submissions in 2020.
and works to improve the regulatory environment to
best align the interests of boards and management
with their shareholders.
Climate Action 100+ Since its launch in 2017, Climate Action 100+ engagements
have resulted in 120 companies nominating a board member
In 2020, RBC GAM became signatory to Climate
or board committee for oversight of climate change, 50
Action 100+, an investor-led initiative focusing on
companies announcing the goal of achieving net-zero
active engagement with the world’s largest publicly
emissions by 2050 or sooner, and 59 companies formally
traded and systemically important carbon emitters,
supporting the TCFD recommendations. Please see the
or companies with significant opportunity to drive
RBC GAM Proxy Season Overview 2020 for examples of
the transition to a low-carbon economy.
Climate Action 100+ shareholder proposals.
In 2020, RBC GAM participated in four of the Climate Action
100+’s engagements, and BlueBay co-led an engagement with
an energy issuer. The purpose of these engagements is to
encourage companies to take actions to reduce GHG emissions,
improve governance oversight of climate change, and enhance
climate-related disclosures.
International Corporate Governance Network (ICGN) Our Head of CGRI sits on the ICGN Transparency and Disclosure
Committee and helped draft industry comment letters in 2020.
RBC GAM is a member of ICGN, aiming to promote
effective standards of corporate governance and
investor stewardship to advance efficient markets
and sustainable economies worldwide.
Investor Stewardship Group (ISG) In 2020, our Head of CGRI continued sitting on the ISG board
of directors.
RBC GAM is a founding member of ISG, which
works to establish a framework of basic standards
of investment stewardship for institutional investors
and corporate governance principles for U.S.
listed companies.
Responsible Investment Association (RIA) In 2020, our Head of CGRI continued acting as Secretary
of the board and Chair of the Governance Policy Committee.
RBC GAM is a sustaining member of the RIA, Canada’s
The RIA completed 5 policy submissions in 2020, and RBC GAM
association for responsible investment whose mandate
became signatory to the RIA’s 2020 Canadian Investor Statement
is to promote responsible investment in Canada’s retail
on Diversity & Inclusion. This statement acknowledges the
and institutional markets.
existence of systemic racism and its impacts on Black and
Indigenous communities and People of Colour.
Sustainability Accounting Standards Board (SASB) In 2020, we continued our role as part of SASB’s investor
Advisory Group.
RBC GAM is a member of the SASB Alliance, which aims
to help businesses around the world identify, manage,
and report on the sustainability topics that matter
most to their investors.RBC GAM Commitment to the UK Stewardship Code 2020 16
Initiative Description 2020 Highlights
Task Force for Climate-Related Financial In 2020, RBC GAM became a supporter of the TCFD, and is
Disclosures (TCFD) committed to producing annual climate-related financial
disclosures aligned with the recommendations of the
RBC GAM is a supporter of the TCFD, which was
TCFD. We also continued our engagement and proxy voting
created by the Financial Stability Board to improve
activities that included encouraging companies to align their
and increase reporting of climate-related financial
reporting on climate-related risks and opportunities with the
information. The TCFD recommendations have quickly
recommendations of the TCFD.
become a global framework for building comparable
and effective disclosures on climate-related risks
and opportunities.
Investors Policy Dialogue on Deforestation (IPDD) In 2020, RBC GAM became a supporting investor of the IPDD
in Brazil, which is co-chaired by BlueBay.
The IPDD initiative aims to coordinate a public policy
dialogue with authorities and monitor developments
to assess exposure to financial risks arising from
deforestation.
UN Principles for Responsible Investment (PRI) RBC GAM is signatory to the PRI, and is committed to putting the
PRI’s six Principles of Responsible Investment into practice. In
RBC GAM is signatory to the PRI, and is committed to
our 2020 Assessment Report, the PRI gave each of our reported
putting the PRI’s six Principles of Responsible Investment
modules a score of A+.7
into practice and believe that they are aligned with our
existing approach to responsible investment.
A full list of our collaborative initiatives can be found at rbcgam.com/cgri. An extract of the collaborative engagements we
conducted as part of these initiatives can be found under Principle 11. BlueBay’s 2020 UK Stewardship Code statement includes
a more extensive list of collaborative initiatives that BlueBay was directly involved in.
Operational initiatives for addressing systemic risks
RBC GAM recognizes that all industry participants have an operational impact on the financial system and its systemic risks.
Therefore, we work to internally reflect the change we aim to see externally.
Examples of commitments and actions:
Commitments Actions
Gender diversity RBC GAM has a formalized diversity policy, which includes specific policies and targets related to gender diversity.
In 2020, 27% of RBC GAM investment professionals identified as women.8
Climate change RBC GAM is part of the robust climate change program of our parent company (Royal Bank of Canada). As part of
this program, we maintain net-zero carbon emissions in our global operations annually. We drive reductions in GHG
emissions, increase sourcing of electricity from renewable and non-emitting sources, and partner with suppliers
to reduce our shared carbon impacts. Finally, we offset all remaining GHG emissions through the purchase of high-
quality carbon offsets.
In our investment activities, we integrate climate risks and opportunities at the product and portfolio levels by
using advanced data and tools, including climate scenario analysis. We also measure and manage climate metrics
for portfolios, establishing climate-based targets where appropriate, and provide fossil-fuel free products and
solutions (in certain jurisdictions) that meet clients’ investment goals. Finally, we are publishing annual TCFD
disclosures, starting with the 2020 calendar year.
Human rights RBC GAM is committed to taking actions to meet our responsibility to respect human rights, as set out in the
United Nations Guiding Principles on Business and Human Rights. Our actions and commitments are aligned
to the overall RBC Human Rights Position Statement.
We integrate human rights considerations into our investment process. In 2020, we also enhanced our internal
research and knowledge base related to human rights as an investment issue.
7
As part of the paid annual membership services, the PRI evaluates signatories’ approaches to the Principles based on its assessment methodology. Once the responses
are assessed, all indicator scores are aggregated and assigned a performance band (from A+ down to E). Our full transparency report as one of over 2,000 signatories
can be found here: RBC GAM PRI Transparency Report. Please refer to Page 6 of this document for a comparison of our module scores against peers.
8
This figure excludes BlueBay.RBC GAM Commitment to the UK Stewardship Code 2020 17
Principle 5
Signatories review their policies, assure their processes and assess the
effectiveness of their activities.
Our policies for effective stewardship
At RBC GAM, we have a number of policies that govern our responsible investment and active stewardship activities. Each
is reviewed on at least an annual basis to ensure it enables effective stewardship, and changes are made as required. Policies
are approved and assured by the relevant overseeing body within RBC GAM.
The following table outlines the principal policies that relate to our responsible investment and active stewardship activities,
including their respective review processes and levels of assurance.9 In general, policies that relate directly to our responsible
investment and stewardship strategies are approved by the CIO and Head of CGRI, whereas policies that relate to adherence
to regulations or other firm-wide policies are approved by our Global Compliance teams and may be subject to internal audit.
In particular, proxy voting is subject to both internal and external audits.
Policy description Process for review10
Approach to responsible investment CGRI Team Changes are then
The overarching policy that governs all responsible investment Annually reviews the Approach to reviewed by:
and active stewardship activities at RBC GAM, including ESG Responsible Investment document Leadership Committee
integration, active stewardship, and client solutions and reporting. and proposes updates that reflect
Ultimate approval by:
the current state of stewardship at
Approach to climate change Chief Investment Officer
RBC GAM and capture any potential
Our firm-wide climate change strategy, which reflects our
improvements required.
commitments under each of the pillars of the Approach to
Responsible Investment.
Proxy voting policy CGRI Team Changes to Proxy
Specifies internal processes for RBC GAM’s proxy voting activities. Annually proposes updates to the Voting Guidelines
Proxy Voting Guidelines with input from are reviewed by:
Proxy Voting Guidelines11
investment teams, based on new issues Proxy Voting Committee
Specifies our policy for how RBC GAM will vote on specific
that arise during proxy voting season
proposals and issues in our proxy voting activities. Changes to proxy voting
and on evolving views for ensuring voting
policy are reviewed by:
is aligned with clients’ best interests.
Chief Investment Officer
Head of CGRI
Reputational risk policy Global Compliance Teams Ultimate approval by:
Specifies instances where an investment in a particular government Maintain Reputational Risk Policy Chief Investment Officer
or corporate security, or exposure to a particular industry as a and provides up-to-date information
result of an investment, raises reputational issues for RBC and/or on economic sanctions.
RBC GAM and its clients. It includes restrictions related to:
Investment Policy Team
Economic sanctions Ensures that the list of issuers captured
Where there are full economic sanctions that prohibit any by the Cluster Munitions and Anti-
financial dealings with a target state, including purchases of any Personnel Land Mines policy is updated
debt from the government of the target state or investment in on a monthly basis, and that no
entities operating under the authority of the target state, investment team is allowed exposure
RBC GAM portfolio managers shall not invest in securities to those issuers through technology
that fall within the sanctions. updates and periodic audits.
Cluster munitions and anti-personnel land mines
When we control the investment policy of a fund, we will not
knowingly invest in companies whose business activities would
contravene the prohibitions contained in the Anti-Personnel
Landmines Convention or the Convention on Cluster Munitions.
9
As a separate entity, BlueBay may have separate policies, as described in its UK Stewardship Code reporting.
10
Any of these processes is subject to internal audit.
11
The RBC GAM custom Proxy Voting Guidelines are applied in Canada, the United States, the United Kingdom, Ireland, Australia, and New Zealand.RBC GAM Commitment to the UK Stewardship Code 2020 18
Policy description Process for review10
Conflict of Interest Policies Global Compliance Teams Ultimate approval by:
Our conflict of interest policies establish the standards Maintain the Conflict of Interest Policies Chief Compliance Officers
required to be followed by RBC GAM to ensure compliance and keeps a list of all material conflicts for each of RBC GAM’s
with all applicable securities laws and regulations of the of interest and how RBC GAM manages legal entities
jurisdictions in which we operate. each item.
Meaningful client reporting
Transparency and accountability are key to maintaining meaningful relationships with our clients and delivering on our fiduciary
duty. We strive to provide our clients with regular reporting on our responsible investment and active stewardship activities.
The majority of our reporting on stewardship is publicly available. This information is reviewed by RBC GAM’s editorial team
to ensure it is written in plain English12, so that it is understandable to a breadth of clients and their beneficiaries. Information
released includes our up-to-date activities as well as areas that we are working to improve. This includes our Approach to
Responsible Investment, Approach to Climate Change, Proxy Voting Guidelines, semi-annual Corporate Governance and
Responsible Investment Reports, and proxy voting records in addition to insights that we publish periodically.
In addition, as a signatory to the UN PRI, we publicly disclose our annual RI Transparency Report on our website, along with a
summary of the corresponding Assessment Report. We also publicly disclose our statements for the UK Stewardship Code and
Japan Stewardship Code. This ensures that clients are able to evaluate RBC GAM’s activities in a balanced and consistent way,
using globally recognized frameworks.
Finally, our client reporting has continuously evolved in response to client feedback. To ensure our reporting is transparent and
meets client requirements, we maintain an open dialogue with our clients on our reporting.
For more information on how we communicate with clients, please see Principle 6 below.
12
In Canadian markets, information is also provided in French, in accordance with relevant regulations.RBC GAM Commitment to the UK Stewardship Code 2020 19
Investment Approach
Principle 6
Signatories take account of client and beneficiary needs and communicate
the activities and outcomes of their stewardship and investment to them.
Our assets under management
The RBC GAM group of companies manage approximately £314 billion in assets worldwide (as at December 31, 2020). Our
23 experienced investment teams are active across multiple capital markets and asset classes, deploying traditional
and innovative strategies.
The approximate breakdown of our assets under management by client, asset class, and geography are as follows:
0.5% 4.6 bn
10.3% 13.4% 54.9 bn 183.8 bn
AUM by AUM by AUM by
35.2 bn
40.2%
client type 49.5%
asset type 48.3% geography
(GBP)
37.8% 35.2 bn
Institutional Fixed Income Canada
Retail Mutual Funds Equities U.S.
High Net Worth Short-Term Solutions Europe – RBC GAM UK
Real Estate Europe – BlueBay
Asia – BRC GAM Asia
Our principal duty is to maximize investment returns for our clients without undue risk of loss. We do this within the investment
limits described in each investment mandate. The majority of our mandates follow a medium to long-term time horizon (i.e. 5+
years). As such, this is the investment time horizon we generally consider in our investment activities and processes.
Our client base is split between retail mutual funds and institutional clients. Our retail mutual funds are each managed to a
specific mandate that individuals and their financial advisors may choose to invest in. Our principal duty within these funds is
to meet the specific criteria and expectations of each mandate. It is generally not possible to collect views from every
individual and advisor invested in these funds; rather, we assess broad market demand and requirements when developing
fund mandates and only adjust these mandates if market requirements change, in accordance with applicable regulations.
We also provide extensive communications and reporting to our network
of advisors and to all investors in our retail funds.RBC GAM Commitment to the UK Stewardship Code 2020 20
Institutional client mandates, on the other hand, are tailored Client engagement is foundational to our institutional
to each specific client. Institutional clients’ views are regularly client approach. Through regular meetings with their client
sought by dedicated investment professionals and incorporated relationship managers, clients provide their views on
into those clients’ unique Investment Policy Statements (IPS). investment performance, as well as matters that are material
Creating a strong, direct relationship with our clients is a to them and their portfolios, including any changes in their
bedrock to how we manage assets and act as effective investment goals or policies. We also explicitly seek out
stewards of capital. clients’ views when we see emerging trends and issues –
for example, those related to ESG factors – to ensure that
Creating strong client relationships we understand their perspectives and make fully informed
RBC GAM has a long history of serving institutional decisions. This meaningful engagement allows us to develop
clients. Each institutional client has dedicated investment a deep understanding of our clients’ views, and ensure those
professionals to serve their unique needs. Our institutional views are appropriately reflected in each client’s IPS and the
portfolio managers discuss with our clients their views and manner in which the mandate is managed.
objectives, which are then incorporated into their IPS. This
includes gathering information regarding clients’ investment Clients’ views are acted upon in a number of ways depending
risk appetite, time horizon, return requirements, and other on the matter at hand. For example, on matters specific to a
parameters specific to responsible investment and active single client, we offer our clients options to create segregated
stewardship. The IPS is the primary governing document in portfolios that impose additional constraints or considerations
our relationship with each institutional client and clearly that reflect their investment goals. In some cases, we will
outlines each client’s mandate restrictions and long-term consider clients’ specific views when we analyze proxy voting
investment objectives. proposals or are engaging with companies. Finally, for matters
that apply to a large number of clients, such as emerging
Each IPS directly reflects our clients’ investment goals, and ESG trends, our product development teams may choose to
while our approach to responsible investment supports a develop a broader investment solution to serve the entire
strong stewardship program, there is some flexibility for clients group of clients.
to specify areas where they wish to deviate from our approach.
For example, certain clients opt to manage their own proxy
voting activities, and some choose to implement additional
ESG screens on their portfolios in addition to the norms-based
screening that applies to all RBC GAM investments.RBC GAM Commitment to the UK Stewardship Code 2020 21
Meaningful client reporting
In order to facilitate effective client conversations and ensure we are continually meeting our clients’ stewardship and
responsible investment needs, we publish the following reports and disclosures regularly:
Method of
Type of information
communication
Quarterly stewardship reporting
We produce regular reports for our clients, covering stewardship activities including engagement case studies
and proxy voting, as well as updates to our ESG integration approaches where relevant.
Many investment teams also include their own insights as part of our client reporting. For example, our Global
Equity team provides quarterly Owners Perspective Reports to clients and our Emerging Markets and Asian
Equity teams produce annual RI reports for their clients. Other teams publish additional articles on material
Client reporting
ESG topics, which are available online and shared with clients.
ESG analysis reports
Several of our institutional clients receive reports outlining the performance of their portfolios on ESG metrics
of interest, such as carbon intensity. These are issued at varying frequencies, depending on the client.
Responsible investment policies
We publish our Approach to Responsible Investment and Approach to Climate Change, outlining all responsible
investment and active stewardship activities at RBC GAM, including ESG integration, active stewardship, and
client solutions and reporting.
Proxy voting disclosures
We publish both our Proxy Voting Guidelines and a searchable database containing the records of our
votes on ballot items for investments held in our retail funds, in accordance with applicable regulations.
Our database is updated quarterly, and our Proxy Voting Guidelines are updated annually.
Reporting on our RI commitments
Every year, we publish our annual and semi-annual CGRI reports, highlighting our recent activities, engagements,
Public disclosure
progress, and achievements related to our Approach to Responsible Investment and Approach to Climate Change.
We also publish our responses to the UN PRI, the UK Stewardship Code, the Japan Stewardship Code, and the
recommendations of the TCFD on our website annually.13
ESG insights
We publish numerous articles throughout the year that cover a variety of ESG topics, such as the financial
implications of climate-related risks and the benefits of gender diversity for investors. We also include high-level
research on the value of ESG integration, socially responsible investing, and other responsible investment tools.
Finally, we conduct an annual global responsible investment survey that reveals the latest views, actions,
and intentions of institutional investors and consultants related to responsible investment and ESG.
Measuring success
We believe that our high level of client engagement and thorough client reporting is effective in ensuring our clients are
well-informed of progress towards their investment goals. In addition to regular client performance meetings, we also gather
specific client feedback and evaluations of our performance as their asset manager to ensure that our clients’ investment
goals are being met through our investment and stewardship activities.
These evaluations have confirmed that our methods of gathering and responding to clients’ views, as outlined in this section,
continue to be effective. In addition, since our institutional investment mandates are based on clients’ own investment and
stewardship policies, there are also no instances of investments not being managed in accordance to clients’ policies.
13
Our first TCFD-aligned report will be released in 2021, covering results from the 2020 calendar year.You can also read
