www.blg.com Open in urlscan Pro
172.67.138.13  Public Scan

Form analysis
0 forms found in the DOM

Text Content

Skip Links
 * 
 * People
   
 * Services
    
   Services
    * Industries
      Back Industries
      
      
      
       * Agribusiness
       * Education
       * Energy - Oil & Gas
       * Energy - Power
       * Financial Services
       * Forestry
       * Government & Public Sector
       * Health Care & Life Sciences
       * Infrastructure
       * Mining
       * Private Equity & Venture Capital
       * Retail & Hospitality
       * Sports & Gaming Law
       * Technology
       * Transportation
   
      
    * Practice Areas
      Back Practice Areas
      
      
      
       * Banking & Financial Services
       * Capital Markets
       * Commercial Real Estate
       * Competition & Foreign Investment Review
       * Construction
       * Corporate Commercial
       * Cybersecurity, Privacy & Data Security
       * Disputes
       * Environmental
       * Environmental, Social and Governance (ESG)
       * Health Care
       * Indigenous Law
       * Information Technology
       * Insolvency & Restructuring
       * Intellectual Property
       * International Trade & Investment
       * Investment Management
       * Labour & Employment
       * Mergers & Acquisitions
       * Municipal & Land Use Planning
       * Private Client
       * Tax
   
      
    * International
      Back International
      
      
      
       * China
       * India
       * Japan
       * Korea
       * Latin America & Caribbean
       * United Kingdom
       * United States
      
      View International Services
      
    * BLG Beyond
      Back BLG Beyond
      
      
      
       * Beyond AUM Law
       * Beyond Business Immigration
       * Beyond Consulting
       * Beyond eDiscovery
       * Beyond IP Strategy
       * Beyond Leasing
       * Beyond Legal Talent
       * Beyond Lending
       * Legal Translation Services
      
      BLG Beyond
      

   
 * Insights
   
 * Careers
    
   Careers
    * Legal Professionals
      
      Find out why BLG is the perfect place for experienced lawyers and new
      graduates to build a career.
      
      * Professional Development
      * Freelance With Us
      * Current Opportunities
      Learn More
    * Paraprofessionals
      
      Our paralegals, law clerks and other paraprofessionals are integral to our
      success. Find out more.
      
      * Professional Development
      * Professional Stories
      * Current Opportunities
      Learn More
    * Business Professionals
      
      We offer a range of opportunities for legal support and business services
      functions. Find your perfect fit.
      
      * Career Development
      * Professional Stories
      * Current Opportunities
      Learn More

   
 * Students
    
   Students
    * Student Programs
      
      
      
      * Meet our Students
      * Student Stories
      * BLG Experience
      * Training & Development
      Learn More
    * How to Apply
      
      
      
      * Calgary
      * Montréal
      * Ottawa
      * Toronto
      * Vancouver

   
 * About Us
    
   About Us
    * Our Story
      
      
      
      * ESG@BLG
      * Diversity & Inclusion
      * BLG U
      * Innovation
      * Media Centre
      Our Story
    * Our Offices
      
      
      
      * Calgary
      * Montréal
      * Ottawa
      * Toronto
      * Vancouver
      * 
      View Offices
    * Stay Connected
      
      
      
      * News
      * Events
      * Deals & Suits
      * Media Coverage
      * Accolades
      * Alumni

   

 * Contact Us
 * Media Centre
 * Subscribe
 * Alumni

 * Close
   
   Clear
   
   SearchLoading
   
   
   SERVICES
   
   No results
   
   
   
   PEOPLE
   
   No results View All People
   
   
   
   INSIGHTS
   
   No results View All Insights
   
   
   
   NEWS
   
   No results View All News
   
   View All Results
   
   
   
 * English
    
   
   
    * LANGUAGE
      
      * English
      * French

 * 
 * 
 * 
 * 
 * 
 * 


INSIGHTS

Back
 1. 
 2. Insights
 3. Findings and tips from Canada’s first survey of fu...


SHARE


FACEBOOK


LINKEDIN


EMAIL

 
 
February 13, 2024


PODCAST


FINDINGS AND TIPS FROM CANADA’S FIRST SURVEY OF FUND MANAGERS ON ESG

How are fund managers responding to the CSA’s ESG-Related Investment Fund
Disclosure Staff Notice? Where are fund managers dedicating their compliance
efforts given the rapid changes in ESG expectations? In this episode of The
Legal Listen podcast, recorded as part of BLG’s Future of Law series, Kathryn
Fuller and Lynn McGrade from BLG’s investment management group explore
highlights from BLG’s ESG survey — the first of its kind in Canada — and offer
suggestions for fund managers looking to make sense of confusing times.

See the full ESG survey report.

Click below to listen to the podcast.

Your browser does not support the player audio element.

Download the podcast (28.89 MB)

Read the transcript

Findings and tips from Canada’s first survey of fund managers on ESG

Kathryn Fuller

So today on The Legal Listen, your host, Kathryn Fuller, that’s me, and Lynn
McGrade from BLG’s Investment Management Group will explore the key findings
from a first-in-Canada survey by BLG on the ESG perceptions and practices of
Canadian fund managers. Using this information, you’ll be able to benchmark your
practices against those of your peers and take away some practical tips on what
to do about some of the more challenging areas of ESG.

Of course, to talk about your specific situation, you can reach out to us or any
of your usual BLG contacts. Links to our contact information are available in
the show notes.

This podcast is part of BLG’s Future of Law series, which captures the
perspectives of industry leaders on the biggest issues facing law and business
in honor of BLG’s 200th anniversary. Check out the show notes for the link to
the full series.

So Lynn, let’s start with a quick recap of the main findings from our ESG
survey. What do you think, for the people that haven’t looked at it yet, are the
things they should know?

Lynn McGrade

Well, thanks Kathryn. I think there were some interesting findings when we got
the survey results. For example, the extent to which ESG is an important issue
for the asset management industry. I mean our survey showed us that more than
six in ten of our survey respondents, Canadian fund managers, consider ESG
factors in their investment process. So it’s impacting a lot of the industry.

Secondly, we also saw the extent of the review by the regulators in this area
and how interested the regulators are, because of those that are involved in
ESG, six of ten also were involved in an OSC sweep. So, I think that really the
regulatory agenda in this area is quite strong and you and I know that for sure
because that kept us quite busy this year.

And the final thing that we saw in the survey, is just the extent to which that
regulatory guidance and the guidance from the sweeps is causing confusion and
the notice that came out is confusing for people and people are really grappling
with how to implement it and deal with it in practice. So, we did see that, for
example, fewer than one in four felt like it was just something that was clear
already. They did really feel like it was something new, a new regulatory
requirement that they hadn’t had to deal with before.

Kathryn Fuller

I definitely heard a lot of grumblings from clients about that staff notice and
I think that we know that this is a complex area and I think the regulators
maybe didn’t appreciate how complex it was when they came out with that first
staff notice and I think we’re hopeful from their experience through the comment
process and prospectuses and through the sweeps that they’ve done that maybe
they’ve become a little bit more aware of the complexities in the area. I know
I’m certainly looking forward to seeing what their rewrite of that staff notice
is going to look like, because I do think that people are going to be looking
for it with great interest.

Lynn McGrade

I agree. It’s going to be a lot of interest coming out of that and it is really
too bad that it’s just going to be guidance again and not something we’ll be
able to comment on. Do you know when that might be coming out? What are your
predictions on that, because we have seen a few mixed messages on this.

Kathryn Fuller

I agree. I think we should put a bet on it Lynn.

Lynn McGrade

[Laughing]

Kathryn Fuller

My best bet. I’m going to go with March and I say that mostly because I know the
OSC’s year end is the end of March and I think it’s one of their priorities that
the staff want to be able to say “done.” Ticked the box.

Lynn McGrade

I won’t take that bet. [Laughing]

Kathryn Fuller

So things are moving fast and beyond the challenges of the staff notice itself,
I know our clients are just grappling with the pace of change in the ESG area in
general. So, what have you been seeing Lynn in terms of how fund managers are
actually responding to all of this?

Lynn McGrade

Well, certainly there’s a lot of focus on disclosure. Disclosure at many levels.
Disclosure in the prospectus documents. Disclosure in the continuous disclosure
materials. So, for example, we did see in our survey that a majority of our
respondents did have to make changes or chose to make changes. Chose to take
another look, in light of the guidance, what they were saying in public
disclosure and offering documents. We also saw in the survey results that
clients are spending a lot more time considering their marketing materials and
ensuring that they are aligned. Let’s just say at least aligned with the
offering documents. Almost half of the survey respondents have changed their
sales communications or marketing materials because of either the notice or the
sweep or a combination of both.

Kathryn Fuller

And I think really we can’t talk about the survey without talking just about
compliance as a whole. So, I know that almost half of all the survey respondents
believe that their compliance-related costs for ESG were going to go up in the
next five years, and I think I’m not surprised by that. I think that we all
expect that we just need to devote a lot more time and attention to this area
because it is new.

What I thought was interesting was that a lot of managers are using very manual
controls to try to deal with this compliance issue and I think it was because
ESG in its nature is not easily programmed. You can’t code, “don’t own more than
10 per cent of this issuer in the fund.” Like that’s not the same way that you
can do for some kinds of concentration restrictions. I think that there are a
lot of nuances on why a particular issuer might be held in the portfolio and
what the rationale might be for how it fits within your particular ESG approach.
I think that requires a lot of documentation and nuanced conversations. And so,
if I’m in the compliance group, I think it’s hard to figure out how to best
demonstrate that you are compliant and ensure you are compliant.

Lynn McGrade

Yeah, I agree and it’s also very different from issuer to issuer and also on a
time basis, like a time horizon basis, it can change over time in terms of what
the priorities are. But it is important to have those compliance objectives.
Obviously, the OSC and the regulators are looking for that but there is also a
lot of risk in the area outside of just the regulatory reviews. Things like,
we’ve seen class action litigation going on. Obviously in the U.S., in
particular, we have seen all the activities of securities regulators south of
the border. And finally, we’ve seen activity by the Competition Bureau in
Canada. So, obviously, the compliance costs are essential in this area for sure
as you mention.

Kathryn Fuller

So, I think you mentioned three different areas of risk to worry about. What
should fund managers be doing to deal with that? What controls seem to be
working?

Lynn McGrade

Well, I mean, I think the industry is doing a great job so far managing those
controls and compliance issues but obviously, looking at the offering documents,
that’s something we see.

Obviously, examining sales communications and marketing material. Thinking about
this whole—we haven’t really spoken about a lot—but characterization of funds.
What kind of ESG funds? Are they ESG objective-forward funds? Are they more
integration type funds if we use the definitional terms that have just come out
from the CFA and others in the industry report.

So, I think looking at how you’re categorizing your funds internally and making
sure everything is aligning with that. Continuous disclosure materials like the
MRFPs and client reporting.

How are you going to show, if you an impact fund, what kind of impacts you’ve
made, etc. And then having, of course, as we talked about, the compliance
policies and procedures to support all of that.

Kathryn Fuller

Definitely. I mean one of the biggest challenges is how do you demonstrate
compliance with what you’ve said you’re doing in those disclosure documents?
Because, you know, how do you figure out how can you demonstrate it? Can you
automate it? Are there ways to be able to test or are we still back in a very
manual kind of process that the compliance department is doing. Or are you stuck
with just getting certifications from your portfolio managers that everything in
the portfolio is complying with the objectives. My personal view is that you
probably need a more robust demonstration of compliance than you would for other
areas that you’ve been thinking about. I think it’s just such a tricky area to
be able to answer questions from a regulator or in a litigation context to show
that you’ve complied.

Lynn McGrade

Right and I think because of all the risks, another big area to think about is
governance, like top-down governance. How is the board going to be satisfied
that you’ve dealt properly with the risks associated with these new products and
the types of investment processes you’re using and how you’re communicating
those processes to the public. So, I think, thinking about governance as well
from a larger perspective is really important.

Kathryn Fuller

It’s that tone from the top.

Lynn McGrade

Tone from the top, that’s it.

Kathryn Fuller

And I think the other part is training. So, you know, you can have all the
guidance coming from the top of the house but you need the people doing the
day‑to‑day on the ground really understanding this is the risk they should be
looking out for. These are the procedures and policies you’ve put in place and
then trying to make sure that everything you’re doing is consistent with that. I
know some of the rules around what you can say in marketing materials seem
really granular, but if you haven’t got a marketing team that understands what
the risk is and what the concern is, then you’re going to set yourself up for a
challenge, I think, from a compliance perspective.

Lynn McGrade

And one last area that has to be taken into account and I’m not sure we’ve seen
all the final evolution of how this one’s going to play out but’s it proxy
voting and when your proxy voting is going to be considered to be a pure ESG
strategy or when ESG is going to just follow along with other financial metrics,
etc., as part of your proxy voting. And also, we’ve seen a number of comments in
the sweeps around stewardship and if you say something about your ESG
stewardship in your marketing materials, you have to have disclosure in your
prospectus. Well that’s new because that word stewardship never even appears in
81-101 right now or the form requirements. So, trying to figure out how
disclosure, proxy voting and stewardship is going to be aligned in all the
materials as well, I think is a challenge and something that the industry and
the regulators in Canada are still working out. Maybe we’ll get some thoughts on
that in the next iteration of the notice.

Kathryn Fuller

For sure and I think it’s interesting because you could have a decision to
invest in something that doesn’t seem at all ESG compliant or vote in favor of
something that doesn’t intuitively seem to work with what your stated goals are.
So, I think that the next wave of what’s going to happen is that the regulators
are going to start to look at what the fund is actually holding. They were
focused on this disclosure piece about what are you saying. But now they’re
going to look at the next level, which is what are you actually doing.

Lynn McGrade

Yes, which is tricky because ESG means different things to different people in
some cases.

Kathryn Fuller

Exactly. So, I think for me there’s a lot of rapidly evolving issues in this
area and I think that there’s more challenges to come. So, I wanted to say thank
you so much for talking about the ESG survey findings from our fund managers and
what they can do to reduce their ESG risk, Lynn.

Lynn McGrade

Well you’re welcome, Kathryn. Very nice to do our first podcast together and for
those who listened, thank you very much and just a reminder that you can find
the link to the full survey in the show notes.

Kathryn Fuller

And reach out to Lynn or I if you have any specific issues that you want advice
on. We’re happy to help talk to you about your particular issues and help you
navigate this rapidly evolving environment.

--------------------------------------------------------------------------------


PREFER VIDEO? WATCH THE EPISODE HERE.

Please enable Targeting Cookies and refresh the page to clear this message and
play the video.



And, because we’re lawyers, a reminder that this content is provided for general
information. It doesn’t constitute legal advice and shouldn’t be used that way.
BLG doesn’t accept any liability for loss or damage arising from use of the
information in this podcast.

 * By: Kathryn M. Fuller, Lynn McGrade


 * Services: Investment Management


 * SHARE
   
   
   FACEBOOK
   
   
   LINKEDIN
   
   
   EMAIL
   
    
    


KEY CONTACTS


 * KATHRYN M. FULLER
   
   PARTNER
   
   Location Toronto Email KFuller@blg.com Phone 416.367.6731
   Quick info View full bio
   
   
   SHARE
   
   
   FACEBOOK
   
   
   LINKEDIN
   
   
   EMAIL
   
    * 
    * 
   
   
   KATHRYN FULLER
   
   PARTNER
   
   SERVICES
   
    * Investment Management
    * Mutual Funds
    * ETFs, Structured Products & Closed-End Funds
    * Private Funds, Hedge Funds & Alternative Investments
    * Registrant Regulation & Compliance
    * 
      
    * [See more on full bio]
   
   Back View full bio


 * LYNN MCGRADE
   
   PARTNER
   
   Location Toronto Email LMcGrade@blg.com Phone 416.367.6115
   Quick info View full bio
   
   
   SHARE
   
   
   FACEBOOK
   
   
   LINKEDIN
   
   
   EMAIL
   
    * 
    * 
   
   
   LYNN MCGRADE
   
   PARTNER
   
   SERVICES
   
    * Investment Management
    * Mutual Funds
    * Private Funds, Hedge Funds & Alternative Investments
    * Registrant Regulation & Compliance
    * ETFs, Structured Products & Closed-End Funds
    * 
      
    * [See more on full bio]
   
   Back View full bio


 * Contact Us
 * Media Centre
 * Subscribe
 * Alumni

 * Accessibility
 * CASL
 * Legal
 * Privacy
 * Cookies

 * 
 * 
 * 
 * 
 * 
 * 

© 2024 Borden Ladner Gervais LLP ("BLG"). All rights reserved.


This Website uses cookies and similar technologies to maintain security, analyze
and improve our Website and assist in our marketing efforts. Note that some
cookies are essential to ensure the operation and security of our Website. To
change your preferences at any time and for more information, consult our Cookie
Notice: More information about your privacy
Custom Settings Accept All Cookies