BCI Responsible Investing Newsletter

BCI Responsible Investing Newsletter - October 2017

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3 bcIMC RESPONSIBLE INVESTING NEWSLETTER Private Equity As ESG risks can develop over time and affect companies, sectors, and regions, the assessment of these factors is integral to the pre- and post-investment process. We require quality information to make good investment decisions and we must own a company to be able to influence its governance and operational practices. Shortly after taking ownership of any company, we outline our expectations as they relate to responsible investing. We encourage companies to identify practical and realistic solutions to ESG risks, and we recognize that introducing good governance and operational practices takes time. Direct Investment Case Study: Pilot Freight Services Established in 1970 and based in Lima, Pennsylvania, Pilot Air Freight LLC (known as Pilot Freight Services) is a full-service transportation and logistics provider with over 75 locations throughout North America and Western Europe and 87 core international partners. In 2016, bcIMC invested in Pilot Freight Services in partnership with ATL Partners. bcIMC holds a 45.4 per cent equity stake and bcIMC and ATL hold joint control of the board. All key votes require the support of at least one board member from each of bcIMC and ATL. Through our board presence, bcIMC has worked with our partners and the executive team to establish strategic direction and improve reporting. In the most recent board meeting, we pushed for an allocation of time to ESG matters. A member of our ESG Integration team attended the board meeting to evaluate the board's approach to ESG matters and governance, and to provide recommendations, where appropriate. bcIMC will continue to work with the company to improve reporting on all fronts and provide strategic direction through our quarterly board interactions as well as our weekly and ad-hoc interactions with the executive team and our partners. Our investment in Pilot aligns with our commitment to invest more capital on a direct basis and manage more assets internally. It also provides us with an opportunity to partner with an industry leading company and an experienced management team that has the capability to scale its business operations over time. Our transformation refocuses bcIMC to become an in-house asset manager that uses sophisticated investment strategies. Although our private equity i n v e s t m e n t s a r e h e a v i l y w e i g h t e d towards funds, we are increasing the number of direct investments in our portfolio with the view to manage a greater percentage of our assets in- house. When we invest directly, we gain more oversight into a company's governance, strategy and operations. When we have a significant ownership interest, we appoint representatives to the board of directors. In this way, we are able to influence the ways and means of increasing the company's long-term profitability and mitigating its ESG risk.

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