BCI Responsible Investing Annual Report

2020-BCI-ESG-AnnualReport_Final

bcIMC Responsible Investing Annual Report

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BCI's Global Quantitative ESG Equity Fund Outperforms BCI launched the Global Quantitative ESG Equity Fund in November 2019 to hold a diversified portfolio of stocks that has exposure to desirable ESG characteristics and can add value over the performance of a broad developed markets benchmark. Developed by BCI's quantitative equity team in consultation with our clients, the fund's quantitative stock selection model uses a blend of ESG measures from four different data vendors to identify the attractiveness of securities from an ESG perspective. We combine subjective evaluations of ESG issues with a new source that uses artificial intelligence techniques to capture ESG-related sentiment from thousands of textual sources to produce an aggregate score for every stock in the investment universe: the stocks in the MSCI World ex Canada Index. The portfolio is then constructed with an objective of maximizing risk-adjusted returns while accounting for transaction costs. Q Why did BCI create the Global Quantitative ESG Equity Fund? A Our clients were asking for a product providing direct exposure to global developed market equities with desirable ESG characteristics. After reviewing the performance and operations of the predecessor, an internal indexed ESG fund, we found a solution that we felt would position the fund to excel. Q How does this fund benefit BCI's clients? A The fund offers our clients the benefit of a strategy that was internally designed and customized to their needs, as compared to indexed or managed externally. Our previous indexed fund was based on the ESG ratings and methodology of a single data provider, while this fund systematically combines ESG information from several sources. It incorporates a diverse set of ESG factors based on company characteristics, as well as sentiment. The fund is managed internally by the quantitative equity team to achieve higher risk-adjusted expected returns at a lower cost than its predecessor. Q Are you using these data sources anywhere else? A The stock selection model for this fund is based exclusively on ESG-related signals. We have also incorporated some ESG factors into our Canadian and Global Quantitative Active Equity Funds alongside other traditional quantitative factors. We have found that such ESG factors are predictive of stock returns, and they also have low correlations with our existing factors. Q&A with Shafiq Ebrahim, Senior Portfolio Manager, Public Markets 15.85% Benchmark 14.23% 1.62% EXCESS RETURN in 2020 on BCI's Global Quantitative ESG Equity Fund relative to its benchmark, the MSCI World ex Canada Index 42 2020 ESG ANNUAL REPORT

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