Ingrid
Imagine driving for a rideshare company only to find out that the AI that sets your wages is paying women less than men. That's not just a social issue. That's an investment risk. From reputational damage to regulatory risk to even lawsuits. These could all impact the long term value of a company. That's why today we're talking about stewardship.
Vanessa, tell me a bit more about that example.
Vanessa
Yeah, So ridesharing; Lyft and Uber. These are companies that are now household names. And Lyft was always part of my vocabulary. But when I asked for Lyft before, there wasn't always somebody ready and willing to give it. So now there's innovative companies like Lyft, like Uber, and they continue to innovate. And one of those new innovations is how they use AI and wage determination.
Vanessa
And the question is, are they running afoul of certain labour laws?
Ingrid
So I think it's stories like this that remind us that companies don't operate in isolation. They have real impacts on people and the communities. And those impacts can directly shape the long term performance of those companies. That's why today we're talking about stewardship. What it is, why it matters and why. Here at TD Asset Management, we are really focusing on that and how we approach it.
I'm Ingrid Macintosh and on today's TDAM Talks, I'm joined by Priti Shokeen, Head of our Sustainable Investing team, and Vanessa Allen, a senior member of our team. We're going to be talking about social issues and stewardship. Together, we're going to take a closer look at how social dynamics from workers rights to A.I. laws turn into risks and opportunities for investors.
So let's take it away and I'll start with you, Priti: Stewardship. Break it down for us.
Priti
Sure. And great to be here. Ingrid - talking about stewardship. I know it's been a long time. So if we were to translate stewardship literally as the word stands, it means that caring and responsible management of something that's been entrusted to you. And I think as fiduciary asset managers, we have been entrusted with finances, you know, financial well-being, retirement money of our clients.
And at the end of the day, we want to make sure that we just don't invest and forget we actually steward that money for long term risk adjusted returns. So stewardship is very much part of our sustainable investing approach or philosophy. It's one of the three pillars that we follow in our Sustainable Investing program. The first one being ESG integration, which is essentially integrating financially material ESG risks into our investment process, identifying all sources of risk and return that may not be identified through traditional financial analysis.
And as you rightly pointed out, you know, all of these things matter to a company's long term success. So ESG integration is super important. But what's even more important in the Sustainable Investment team's belief is stewardship. So once we invest in a company, we want to make sure that we have a regular dialog with the company. We are exercising our proxy voting, which is essentially tied to our ownership, the share ownership of the company for us as investors.
So for example, we cast over 34,000 votes alone this year in 2025, and we engaged with over 200 companies last year. And the topics we cover are very wide ranging. We focus on financially material issues, including environmental, social and governance issues that may create risks or opportunities for those companies. So today, I'm very happy to focus on “S-Factor” of our ESG pillar.
And I know the social side of things are not that talked about given the prominence of dialog on climate change and governance. So we want to make sure that the financially material social issues, as you highlighted in the example of Lyft, are also in front and center for the investment team, and we're considering them as good fiduciaries and stewards of capital.
Ingrid
And I think that's such a great conversation because that is exactly what we are at TD Asset Management. We are stewards of our clients capital and and sustainable investing has come so much further from just simply what we will or what we won't invest in, but how we work with the companies who we invest our clients money on behalf of are continuing to to operate their companies.
Now, Vanessa was great to give us the Lyft example at the outset, but haven't had an opportunity to introduce you, Vanessa ... maybe Priti?
Priti
For sure, so Vanessa has been a longstanding member of our sustainable Investment team. She joined TDAM in 2016, I believe, and has been a rotational analyst in our fixed income team, our risk team, and now part of the sustainable investment team. She has experience in policymaking in the United States. You can imagine how challenging that can be. And then she decided to pivot and get her MBA and be part of the investment management industry.
Ingrid
Thank you for that. Pretty. I think it's one of these things in a a sustainable investing in our approach is an adjunct to our investment teams that's fully integrated across what we do. So I think when I talk about the Sustainable Investing team, you are part of the investment team with this focus on on these factors. Vanessa, can we talk a little bit more specifically because as you said at the outset, pretty people are very comfortable with what it means to look at “E” and what it means to look at “G”, But what are we talking about when we talk about the “S” elements of ESG?
Vanessa
So I'll just say that that one letter is a large number of different issues. It's a huge umbrella and I can't do any piece of it justice in this one podcast. But we're talking about human rights, how companies are understanding that the standards out there in terms of how people should be treated, the communities around them should be treated, how are they adhering to globally understood standards like the United Nations guiding principles on business and human rights?
What are the practices that they're putting in place in order to ensure their adherence to those standards? How they're doing, their due diligence, a different business partner to ensure that they're not involved in any human rights controversies on into issues of human capital. Workers are a significant stakeholder in pushing forward the strategy. The growth of companies. How are those stakeholders being treated in terms of compensation, workplace safety?
How is the company building a healthy business culture in order to keep and attract talent? So these are some of the issues that we focus on in our stewardship work. It gets very granular. There are some issues that kind of roll up to human rights, but there's interaction with other issues such as environmental and governance issues as well.
Ingrid
Into to your opening remarks pretty as well. These don't show up in the quantitative analysis. These don’t show up in things we can see in the numbers. These are the things we need to dig a little bit for and talk a little bit about, you know, staying focused on the long term because I think sometimes there is transient focus on the sustainability space.
But can we talk a little bit more about the types of things that can drive a company off course, maybe in this in this realm?
Priti
Yeah, absolutely. I think AI is a big focus right now, and if we look at it from a social lens, there's so many issues ... or risks and opportunities attached to AI. So some of the risks are, you know, bias in AI systems we talked about Lyft a little bit, but that's coming across all sectors. So the way we're thinking about it is, you know, how can we engage with the developers of the AI or the hyperscalers versus the users of the AI?
And these are two distinct kind of risks and questions that we pose to companies in our portfolios, to Amazon, for example. You know, there's a, you know, growth opportunity related to AI in the cloud system. You know, they've always been used in the investment portfolio, not just for the retail side of things, but also what potential upside we see in the cloud.
You know, computing business at Amazon, AWS, has traditionally, you know, seen. And so I think we saw a proposal over there that Vanessa can actually go into the details of in terms of responsible adoption or governance of the AI. I think that's a key issue that we're grappling with right now. In the past, we've seen companies whose bottom line being impacted by community controversies or escalations or, you know, conflicts in the mining sector, for example.
So in our resource intensive portfolio, there are companies that are in the resource business. We consider community as a key stakeholder because that has the potential. Those kind of incidents have the potential to disrupt production depending on what percentage of revenue comes from that particular side. It can have, you know, a range of impacts on the stock price or the long term performance or, you know, view of our analyst of that particular company.
So it's just one example where, you know, community relations plays a key role and it's not an easy one, right? We have to lift under the hood and see what policies do the company have? What is their interaction model with the communities? Have they analyzed all the impacts, environmental and social impacts on the communities that they're operating in or are going to be venturing out into?
So, you know, that's the kind of, you know, analysis or research we tend to do, which is not always, as you pointed out, quantitative. There's a lot of qualitative aspect to it and a dialog based aspect to it with the companies.
Ingrid
And knowing the right questions to ask. I think when people think about ESG, historically it was a “do good” and a “feel good” and it was very altruistic. But I think, you know, we talked about it every day, but I think we have to keep driving home this this is about appropriate risk measurement, management and investment performance as we do it.
TD Asset Management today manages over half a trillion in assets on behalf of Canadian global clients. What power does that give you to sit down with management teams? Can you talk a little bit about that process? When you're sitting down with management teams?
Priti
Absolutely. I think, you know, this is a very good question and we work with our portfolio management team on a regular basis to be able to access management and also, you know, sometimes the boards of these companies to ensure that they have effective oversight over these specific financial tool risks. And I think one example I can give you within the Canadian space, because we are sometimes, if not a significant one of the top ten shareholders of companies in the Canadian space.
We have been able to have a lot of dialog with, you know, companies and management on Indigenous relations and reconciliation. And I think that is a very important issue as a Canadian based asset manager that we have focused on. And I know, Vanessa, you've engaged with companies on indigenous issues quite a lot. So maybe you can provide an example or two on that.
Vanessa
Yeah. I think with Canada bringing in the UN Declaration on the Rights of Indigenous People, they've folded this into some of their laws and it's been increasingly becoming a focus and investors are paying attention to what's happening at the federal level and companies too. And we're expecting companies to understand sort of their contributions to reconciliation as well. And given that the federal government, they're increasing their contributions towards these communities.
There are different claims that they have paid, and it's transferring a lot of wealth to indigenous communities. And so when we're talking to corporations to understand how they're engaging the communities around them, including indigenous people, we're trying to understand how they're sharing the benefits of the significant pieces of infrastructure that they're putting in place. And one interesting and important way of providing Indigenous groups a seat at the table are equity partnerships.
And what I find interesting are the collection of entities coming together to help support in the past being able to take part in an equity stake has been expensive and not very affordable for indigenous groups. And so there are different loan guarantee programs that are out there. Now at the federal level. There's a loan guarantee program, and there there are significant programs at federal level.
Vanessa
That's $10 billion that was announced earlier this year. And there are entities like the First Nations Finance Authority. It's a member organization with different indigenous groups as members. And what this entity allows them to do is pull projects together to help lower the interest rate. So they're sort of building a larger package so it's more attractive to the market.
And so we're engaging not only corporations but myself and some of the fixed income desk have talked to these various entities to understand what are the investment opportunities there.
Priti
Yeah, and it really goes to show that, you know, these are opportunities that companies cannot afford to miss anymore because, you know, they do offer, you know, superior risk adjusted return or at least that resilient financing framework, you know, to work closely with the indigenous community on projects that would not be viable before. So I think there are these massive developments that happen in the marketplace, which wouldn't be, you know, almost invisible if we were not paying attention to it through stewardship.
Ingrid
Yeah, And I think you talk about the developments, right? So we've been talking about social factors, ESG for many, many years, but the landscape changes all the time is one example. You talked a little bit about, you know, evolving technology and some of the things you talked a little bit about Amazon. Talk about some of those other elements.
I mean, I know our listeners love examples of where this is coming to play. And we had talked about employee surveillance, I recall.
Priti
Yeah. Vanessa, you want to take a.
Vanessa
Had that idea that's an Amazon.
Ingrid
That's a terrifying one.
Vanessa
That's an Amazon question. So Amazon is a company that we have engaged quite a bit and they're interesting because they have really moved forward innovation within their warehouses. They have brought in different ways to make it more efficient. They bring in robotics at the same time. They have been a company that has received quite a number of shareholder proposals, asking for audits of their workplace safety.
And it's not just something that you see in proposals. There are different jurisdictions that have raised fines on the company because the level of surveillance that they do of their employees, it's what they might call excessive breaching some.
Ingrid
Kind of privacy law. Yeah.
Vanessa
Exactly. And then in California, they face fines related to like having having quotas, but not the employees, not really knowing what the quotas are. So they don't know what they're working towards. So we want to engage them to understand any additional context and then understand what they're doing now that these jurisdictions have brought fines, what are they doing to correct the issues?
There are other elements that sort of raise some red flags closer to home. In Canada. In mid 2024, in Quebec, there was a union certification and soon after that Amazon decided to close all the facilities and the facilities weren't that old and there were seven. So when you think about investments, there's a significant outlay to put forward those warehouses.
But then just to close a few years later, but they indicate it's efficiencies. Now they're using third parties to do deliveries. But some see it as kind of pushing back on unionization. And so we'll see how that all plays out, because in British Columbia in the summer, there was a union it recognized, too, there. So we'll see what happens.
But it's something that because it's current, it's important for us to keep up our conversations with the company.
Ingrid
There's so much that's in here. There's the changing landscape in which we're all operating in. And when we think about the stewardship conversation and, you know, the story that we're telling about one particular company, it might be happening at any company. And as a stewardship team, you're almost, as you say, Priti, you're almost a bit of an early warning sign to the company to like, this is not okay with shareholders and this is why we're going to vote or move you this way.
Ingrid
But when I think about some of the examples you've talked about, you play that out ... media is instantaneous, news is everywhere and the end customer behaves differently. And that, of course, has a very direct impact on the share value and the long term value of a company. So these aren't just behind the scenes conversations with asset managers.
We're almost predicting where these risks and people will react now in a way that they've never reacted before as well. Are there any other themes?
Vanessa
And I'll just add to that. One of those customers is Canadian Government, who after the shutdown in Quebec, had indicated that they're going to review their relationship with Amazon. So there are real economic repercussions to large governments, different jurisdictions rethinking sort of their relationships with Amazon or other countries.
Ingrid
And a beautiful example of how this is just not altruism. This is good business or or not so good business when it comes to shareholders rights.
Priti
Absolutely. And I think we're just scratching the surface on the social issues with this example. But it really goes on to, you know, demonstrate that, you know, beyond the headlines, you know, there are some recurring, inherent systemic risks that companies may have, that if we do not have a proactive dialog with them, we would not understand as investors.
So I think that's where the value of stewardship comes in. It's almost like, you know, I like to use the analogy Ingrid, if I may, it's like, you know, planting a garden and then tending to it, right? So you can just plant the seeds and just forget about them. You know, you have to continuously water it to make sure that, you know, all the external factors are taken into consideration and offset.
So I think, you know, analogies aside, I think, you know, it's very important to have the stewardship element to long term investment.
Ingrid
So well said. I think what we've covered here today is really, you know, these social risks are financial risks and being at the table to partner with companies and help guide either through dialog or through the proxy voting process is a very powerful tool when used in partnership on behalf of clients. I think stewardship really is that avenue to do this to gain that context, to share insights and to help companies, you know, really perform better.
That brings us to the end of today's episode. Again, for more on stewardship, you can check out our website for TDAM’s 2024 Sustainable Investment and Climate Report. And also our 2025 proxy report will be coming out soon. Our ESG conversation can't stop here as Priti said - today we focused on the “S” (and) in a future “episode” we're going to turn to “G” - governance.
We're going to take a closer look at how we as asset managers evaluate boards, vote our proxies and hold companies accountable. Until then, I'm Ingrid MacIntosh. Thanks for listening to TDAM Talks and you can find us where you love your podcasts. Thanks and have a great day.
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