Part C ESG-Related Terms and Strategies

While this Notice uses the term “ESG”, there are other related terms that are commonly used by ESG-Related Funds and more broadly throughout the investment fund industry. Those terms include the following:

sustainable
responsible investing or RI
socially responsible investing or SRI
ethical
green

ESG-Related Funds generally consider ESG factors in their investment decision-making processes. However, they may focus on only one or two of the three areas of ESG and may even have a concentrated focus on one or a small group of factors in any of the are as of ESG (e.g. a fund that is focused only on improving or promoting board diversity). For illustrative purposes, the following is a non-exhaustive list of ESG factors that may be considered by such funds in their investment decision-making processes:

Environmental	Social	Governance
Air and water pollution	Community relations	Audit committee structure
Biodiversity	Data protection and privacy	Board diversity
Climate change and carbon emissions	Diversity	Bribery and corruption
Deforestation	Employee engagement	Executive compensation
Energy efficiency	Human rights	Lobbying
Waste management	Indigenous inclusion and reconciliation ¹	Political contributions
Water scarcity	Labour standards	Whistleblower schemes

¹ Some stakeholders are of the view that, given the importance of Indigenous inclusion and reconciliation in Canada, the concept of “ESG” should be expanded to “ESGI”, with Indigenous inclusion and reconciliation being included as a separate area.

Name	Definition
Screening	The fund applies rules based on defined ESG-related criteria to determine whether an investment is permissible. There are different types of screening, including exclusionary or negative screening , best-in-class or positive screening , and norms-based screening , which are explained immediately below.
Exclusionary or negative screening	The fund applies rules based on undesirable ESG-related criteria to determine whether an investment is not permitted, including the exclusion of certain types of investments, sectors, or companies from a fund’s portfolio based on certain ESG-related criteria.
Best-in-class or positive screening	The fund applies rules based on desirable ESG-related criteria that determine whether an investment is permitted. In some cases, “best-in-class screening” and “positive screening” may have slightly different meanings. Best-in-class screening: The fund invests in companies that perform better than their peers on certain ESG-related criteria. Positive screening: The fund invests in companies that meet certain desirable ESG-related criteria.
Norms-based screening	The fund applies rules based on compliance with widely recognized ESG-related standards or norms (such as international conventions) that determine whether an investment is or is not permitted.
ESG integration	The fund considers, on an ongoing basis, ESG-related factors within an investment analysis and decision-making process with the aim of improving risk-adjusted returns.
Thematic investing	The fund selects assets to access specified ESG-related trends, such as climate change and the shift to a more circular economy.
Impact investing	The fund invests with the intention of generating a positive, measurable social and/or environmental impact alongside a financial return. The aim is to contribute to, or catalyze, environmental or social improvements.
Stewardship (sometimes also referred to as active ownership)	The fund uses investor rights and influence (such as proxy voting and shareholder or issuer engagement , which are explained immediately below) to protect and enhance overall long-term value for clients and beneficiaries, including the common economic, social and environmental assets on which their interests depend. This includes influencing the activities or behaviour of underlying portfolio companies on ESG-related matters.
Proxy voting	The fund votes on management and/or shareholder resolutions in accordance with certain ESG-related considerations or aims.
Shareholder or issuer engagement	The fund interacts with the management of the company through meetings and/or written dialogue in accordance with certain ESG-related considerations or aims. The term shareholder engagement is generally used where the fund is a shareholder of the issuer, while the term issuer engagement may be used where the fund is not a shareholder of the issuer but is instead a holder of debt securities of the issuer.