We leverage
solid governance
practices.
We believe that sound governance is essential to optimal risk management. This is why we are continuously refining our own practices. In addition, we have implemented a series of processes to help optimize the governance systems of our portfolio companies and external managers.
Québec companies
supported in their
implementation of sustainable
business practices
discussions to
raise awareness on ESG factors
among our portfolio companies
and external managers
resolutions voted on
at 3,635 shareholder meetings
held by our portfolio companies
technology
risk analyses
Our principles
of sound governance
CDPQ’s activities are governed by a number of laws, regulations and policies. We adhere to strict rules of governance in order to achieve our investment objectives rigorously, efficiently and transparently.
CDPQ is governed by three bodies (Figure 10):
- The Board of Directors
- The Executive Committee, composed of the President and Chief Executive Officer and senior executives from various business units
- The Executive Committees of the subsidiaries and their Boards of Directors1
Our governance rules evolve continuously to better take into account current issues. This is why in 2023 we updated our two Codes of Ethics: one for employees and another for the Board of Directors. This evolution enabled us to:
- Deepen the understanding of ethical rules by updating how they are presented
- Meet best practices with practical examples and decision-making tools
- Update our rules, which take into account our evolving practices and new trends in this area
- Align our Codes with those of our subsidiaries, Ivanhoé Cambridge, Otéra Capital and CDPQ Infra, to facilitate management and strengthen our governance1
1. On January 24, 2024, CDPQ announced the integration of its subsidiaries—Ivanhoé Cambridge and Otéra Capital—through a process that began at the end of January 2024 and will conclude 18 to 24 months later.
Organizational structure
(December 31, 2023)
1. On January 24, 2024, CDPQ announced the integration of its subsidiaries—Ivanhoé Cambridge and Otéra Capital—through
a process that began at the end of January 2024 and will conclude 18 to 24 months later.
OUR GOVERNANCE AT EACH STEP OF THE INVESTMENT PROCESS
CDPQ relies on its Sustainable Investing Policy to ensure that ESG factors are taken into account in its portfolio management. In both pre- and post-investment, we encourage the deployment of constructive capital.
PRE-INVESTMENT
We avoid investing in companies or sectors that are:
- Unsustainable for society or the environment
- Prohibited by applicable Canadian law or international conventions
- Entities subject to Canadian financial prohibitions
Once an investment opportunity meets our requirements, and based on certain thresholds, it is submitted to committees based on the sector concerned and the results of our ESG analyses (Figure 11).
A rigorous process for approving investments
POST-INVESTMENT
We monitor our total portfolio using specialized tools, resources and rigorous analytical processes. This enables us to assess, anticipate and manage ESG issues that our portfolio companies may face in the future. We then hold discussions internally and with stakeholders to optimize our decision-making.
When an issue arises, an escalation procedure is initiated. Depending on the nature of the asset and the circumstances, a discussion group is formed with business unit risk managers, members of the Risk Management, Sustainability, Communications and Brand teams, as well as the team for the asset class concerned, in order to develop an overall sense of the situation. We can then make an informed decision and enter into discussions with the company to implement the mitigation measures needed to address the issue.
We apply the same analytical process for publicly traded companies. When the risk appears too great, we choose to divest as a last resort.
Our advisory role with portfolio companies
Our portfolio companies benefit from our ongoing support on sustainability issues.
We use the following levers of influence to support their adoption of best practices:
- Strategic support
- Dialogue and engagement
- Shareholder voting
STRATEGIC SUPPORT
Our teams have extensive expertise in providing post-investment support to our portfolio companies. We support them as they integrate sustainability considerations into all areas of their business: ESG strategy, disclosure, Board composition, business risk management and executive compensation.
In Québec, we have provided support to 10 companies seeking to optimize the integration of ESG issues into their business strategies—see the case study on Workleap.
Our teams also worked together this year to create a Playbook for Controlled Operating Companies. The purpose of the playbook is to ensure that best practices in governance and management are maintained throughout the life cycle of the companies concerned. CDPQ’s investment teams are responsible for its application.
As part of our Sustainable Development Action Plan 2023–2028, we committed to increasing the number of Québec companies in our portfolio that take ESG factors into account in their business strategies in order to foster their resilience and long-term performance.
DIALOGUE AND ENGAGEMENT
CDPQ maintains an open dialogue with its portfolio companies and external managers to understand their realities and the challenges and opportunities they face (Figure 12). We use these exchanges to share our expectations concerning their governance practices, risk management and integration of ESG factors into their business plans—see the Inigo case study.
In 2023, we conducted more than 308 discussions with 129 companies and 81 external managers. This honest dialogue, based on trust, fosters the development of privileged relationships with our partners as well as a comprehensive view of developments in our portfolio.
We have also relied on the EOS team at Federated Hermes, a globally recognized provider of shareholder engagement services, to engage with more than 528 portfolio companies in which we are shareholders. This collaboration has enabled us to increase our engagement capacity on subjects such as artificial intelligence, the circular economy and water management.
Topics addressed with our portfolio companies and external managers
SHAREHOLDER VOTING
We use shareholder voting, in accordance with our Policy Governing the Exercise of Voting Rights of Public Companies, to express our convictions, particularly in the areas of governance, climate and DEI.
Our Sustainability team leads this activity throughout the year. We encourage engagement with and support for our portfolio companies as a complement to shareholder voting, in order to engage them in dialogue prior to and during annual general meetings.
In 2023, we voted on:
resolutions, including shareholder proposals and management proposals, on several topics at
shareholder meetings held by our portfolio companies
The topics most frequently discussed in 2023 were appointments to Boards of Directors as well as disclosure on climate change and social issues.
The various topics targeted by the shareholder proposals on which we were called upon to vote
OUR RATE OF SUPPORT
Through the vigilant exercise of our shareholder voting rights, we seek to strike a fair balance between respect for our environmental and social convictions and the creation of long-term value for our depositors. In the absence of extenuating circumstances, we vote against the appointment of a director of a public company when the company has fewer than 30% women on its Board or does not have a sufficiently ambitious climate plan.
We have adopted guidelines to assist us in our positioning. For example, we do not necessarily support all shareholder proposals, as some are deemed too restrictive and not rooted in the company’s reality to allow true progress.
Such decisions are reflected in our rate of support for shareholder proposals:
support for proposals on environmental issues
support for proposals on social issues
To maximize our support rate, we actively work on reviewing, and sometimes even developing, proposals so that they will meet the interests of shareholders while remaining achievable by the companies concerned. We transparently publish our voting positions after each shareholder meeting.
of support
Workleap, a company founded in Québec and active around the world, offers a software platform that simplifies talent management and the use of Microsoft 365 productivity tools. Its business solutions are used by more than 20,000 companies in over 100 countries.
We are supporting Workleap as it pursues its acquisition strategy, which aims to broaden the offering on its platform, penetrate new markets and create more value for clients. This is the first external partnership for the company, which has been self-financed and profitable since its inception. Through an approach based on collaborative support, we are helping implement an ambitious acquisition strategy and a solid governance structure consisting of external directors. Our wide-ranging discussions have also helped Workleap acquire tools and processes that will help this Québec flagship crystallize its long-term future and continue growing global sales.
Inigo is a global company specialized in the insurance and reinsurance of the risks associated with complex and major events. Founded in 2021, the company has integrated ESG factors upstream in its business model and strategy.
Inigo invests heavily in research on catastrophes to better understand the changing nature of climate risks and integrate these observations into its underwriting decisions. In its first year of operation, it defined sustainability risk appetite indexes in underwriting and investment, and in 2022 it became a member of ClimateWise, a TCFD-aligned network. Inigo has also forged strategic partnerships with nature-related philanthropic organizations to have a positive influence beyond the traditional insurance value chain.
CDPQ advised the company on developing its ESG and risk management frameworks, including the establishment of DEI and risk KPIs. As a young company, Inigo needed to focus on attracting, developing and retaining diverse and committed talent, as well as on creating a solid governance structure. CDPQ played an advisory role in support of this process.
We held discussions with Probe Gold, a Canadian gold mining company, to guide it on adopting governance best practices following its transition, in January 2023, from the TSX Venture Exchange to the Toronto Stock Exchange.
We discussed a variety of topics, and particularly those of interest to investors such as CDPQ, including the composition of the Board of Directors and its committees, stock option plans and compensation disclosure. Since our discussions, Probe Gold has enhanced disclosures related to the structure of its executive compensation and has pursued efforts to move toward governance best practices in Board and committee composition, including gender diversity. These actions are aligned with its business strategy and will ensure better risk management.