Inhance Balanced SRI Portfolio Commentary
Portfolio Advisor: Vancity Investment Management Ltd.
Fund Commentary - March 31, 2012
Over the quarter, the Portfolio Sub-Advisor engaged several
companies on diversity, human rights, project risk and climate
change. The Portfolio Sub-Advisor met with Teck Resources to
discuss actions and policies to promote gender diversification in
the workplace. Teck provided an overview of initiatives at company
operations, demonstrating in-depth knowledge on the benefits of
diversity and committed to provide increased reporting in the
annual sustainability report. The Sub-Advisor filed a shareholder
resolution with Agrium calling on the board to review and report on
policies and initiatives promoting diversity in the workforce.
Agrium agreed to increase reporting on progress on diversity,
including success stories and new initiatives. They also engaged
with Valener on the need to disclose information on the company's
approach to addressing climate risks. The company agreed to provide
more information through disclosure by Gaz Metro, the primary asset
held by Valener. The Portfolio Sub-Advisor met with IAMGOLD
to discuss human rights policies, practices and reporting. The
Company responded providing information on current human rights
initiatives including development of a stand-alone policy. Finally,
the Portfolio Sub-Advisor jointly filed a shareholder resolution,
with two other major shareholders, calling on the Enbridge Board of
Directors to assess the risks associated with First Nations'
opposition to the Northern Gateway Pipeline project and, detail how
the company intends to mitigate the operational, reputational, and
legal risks of such opposition. The resolution will be presented
for voting at the upcoming annual meeting of shareholders.
As the latest quarter's strength illustrates, after months of
squabbling and confusion, the absence of any negative surprises out
of Europe and the success of the ECB liquidity initiatives offered
welcome reprieve to markets starved for some confidence-boosting
news. However, the Portfolio Sub-Advisor believes these liquidity
measures, while positive, merely mask the deeper, on-going
solvency, deleveraging and austerity issues still facing much of
Europe. While they find the modest pace of growth in the US is
encouraging, global growth remains far from booming with
China's mandated economic slowing posing risks of a "hard landing"
scenario. Furthermore, they believe potential developments
surrounding Iran, Spain, oil prices, European elections and
expectation shifts on any of the aforementioned "big picture"
variables suggest current complacency could be rudely shattered,
inducing downside volatility typical of the long work-out phase
post a major financial crisis. Thus they strongly affirm that the
balanced nature of the Portfolio remains an appropriate and
attractive lower-risk strategy in the current environment for
improving the overall return and mitigating inherent volatility.
The Portfolio Sub-Advisor also indicates that within the overall
equity fund content, they intend to undertake a modest shift from
the IA Clarington Inhance Canadian Equity SRI Fund to the IA
Clarington Inhance Global Equity SRI Fund while leaving the IA
Clarington Inhance Monthly Income SRI Fund intact. They believe
that in the prospective period of deleveraging and slower global
growth, risks of appreciation of the Canadian dollar have
diminished; that the attractiveness of non-resource stocks will
rise relative to resource stocks; and that the breadth of
investment opportunity available in other more diverse markets,
particularly the US, now offers a compelling alternative to our
resource-heavy Canadian market. Hence, they believe this shift to
be both prudent and the most appropriate and attractive strategy,
while also mitigating the inherent volatility in the present slow
growth and less predictable world economic environment.