BCI Responsible Investing Newsletter

Responsible Investing Newsletter: Governance

Issue link: https://uberflip.bci.ca/i/1076427

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RESPONSIBLE INVESTING NEWSLETTER / Q4 — 2019 3 3 As an active owner, a significant part of our board activity includes encouraging portfolio companies to identify practical and realistic solutions to ESG concerns to strengthen the company's operations and increase returns over the long-term. Our governance oversight allows us to engage with management on key issues, provide feedback on reporting, and establish key performance indicators (KPIs), which help us to understand the long-term outcomes of our ESG activities. PILOT FREIGHT SERVICES BCI is a majority stakeholder in Pilot Freight Services (Pilot), a full-service global transportation and logistics company based in Lima, Pennsylvania. When we invested in Pilot in 2016 it was our first significant private equity position that afforded us governance rights. Of the six-member board, BCI holds two board seats. Through our board presence, we conveyed to the management team that transparency and reporting are critical to us as institutional investors and we have worked closely with Pilot to strengthen reporting to the board of directors. The board's compensation Private Equity committee tasked Pilot's chief administrative officer with creating a formal ESG strategy for the company and tied this plan to their performance incentives. In addition, BCI had in-depth discussions with the management team on the topic of diversity, and we asked Pilot to provide KPIs for diversity across all levels of the organization. These benchmarks allow the board of directors and management to determine what policies and programs are required to support a diverse workforce, positively impact employee retention, and contribute to the company's operational success. In the 18 months since BCI invested in Pilot, they have built up a robust ESG reporting framework that addresses pollution and energy efficiency, accounting standards and board composition, workplace safety and diversity. Now, diversity is a regular agenda item at almost every Pilot board meeting. With the new ESG reporting framework in place, we are better able to measure progress and work with management to apply best practices and grow the long-term value of our investment. Our direct investments allow for greater oversight of a company's governance, strategy, and operations as well as its exposure to ESG risk. We integrate ESG considerations into our due diligence and, once invested, we outline our expectations.

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