Canadian ESG Series 2021 | Canadian ESG and the role of the board

Alison: Okay, let's get started here today. Good morning, or afternoon, to everyone. Welcome to Gowling WLGs webinar, Canadian ESG and the Role of the Board. ESG has been a topic of conversation over the last year or so, and we've seen some boards really lean into that conversation, but others are still trying to get the lay of the land. Today our panelists are going to cover some key areas of interest to directors in helping to frame the ESG conversation. Before we turn to our panel, Gowling WLG has hosted several webinars relating to ESG already. We've listed those on the slide. We've also included a couple that we intend to provide in the future. If you've missed any of our webinars they are available on demand on our website. So you can go there to view them if you wish. We've also published a number of articles on ESG and those, again, are also available on our website, should you wish to view them. Just a couple of housekeeping points. We will be using the Q&A function for questions. Please feel free to put your question in during the panel discussions. We will try and address them during the discussions but we will also have a Q&A session at the end of the discussion as well where we can address questions. Please note that this presentation is being recorded and we will post it on our website within a few days for on demand viewing. Just a little bit of a legal disclaimer, because this presentation is being put on by lawyers, we would be remiss if we didn't include such a disclaimer. Today's session will be a high level overview. It is for general information purposes and doesn't constitute legal advice. If there's any specific advice that you do require please do contact your legal counsel. Note that the information in this presentation reflects the law and other relevant standards that are in effect of the date of the presentation. Now let me turn to our panel and introduce them.

For today's session we have a great panel of individuals with extensive experience advising boards and sitting at the board table. Adam Chamberlain, a partner in our Toronto office, is certified as a specialist in both environmental law and Indigenous legal issues, by the Law Society of Ontario. His practice encompasses diverse matters related to environmental law and to the creation and maintenance of relationships between Indigenous communities, governments and non-Indigenous organizations. Adam's practice regularly takes him across Canada and into the far North, at least during non-COVID times, although I'm sure he's itching to get travelling again like lots of us are.

Brett Kagetsu is a partner in our Vancouver office, and a National board member of our firm, who also leads the Business Department in Vancouver. Brett assists public companies with all legal aspects of their business, including securities law and stock exchange policy compliance, as well as with the conduct of shareholder meetings. He also provides strategic advice to companies as well as to dissident shareholders in connection with contested shareholder meetings.

Deborah Rosati is an accomplished corporate director, entrepreneur, fellow chartered professional accountant and certified corporate director. As a corporate director Deborah has extensive knowledge in the areas of corporate governance, board diversity, corporate strategy, public company accounting and reporting, as well as financing, transformation, M&A and succession planning. Deborah is currently a director on numerous boards and is the founder and CEO of Women Get On Board Inc., a leading member based company that connects, promotes and empowers women to corporate boards.

I'm Alison Gray, your moderator for today. I'm a partner in our Calgary office in the advocacy department. I represent companies and their directors and officers in litigation and regulatory matters and have advised special committees to boards.

Let's turn to our discussion now. This is basically our agenda for today. Our panel is going to discuss some of the key issues that directors are facing today in respect of ESG, including why tackling ESG issues is important for the board, the role of the board in addressing ESG and best practices. Just so we're all on the same page I though it might be helpful to provide a very brief definition of ESG. The primer for environmental and social disclosure published by the TMX Group and CPA Canada includes what I think is a somewhat useful definition. ESG refers to environmental social governance factors that can impact company value and investor decision making. Environmental and social factors include financial and material risks and opportunities such as climate change, water use, human capital management and health and safety. Governance includes board quality, independence and accountability, board oversight of executive performance and compensation, and the boards oversight of company strategy, risk management, performance and disclosure of E & S factors. Again, please feel free to put any questions in the Q&A at the bottom of the screen, and we will try to address them as we go along through our panel discussion, or certainly at the end of the discussion. So, let's turn to our panelists and our first topic for today, which is why is ESG relevant for boards? Why is it something that boards need to be concerned with? Adam, why don't we start with you. From your perspective, as an environmental lawyer whose practice also encompasses Indigenous legal issues, why should directors care about ESG?

Adam: Thanks very much, Alison. First of all I'll just say both environmental and Indigenous matters are, of course, very important for boards to consider. But I want to start very quickly with an acknowledgement that we're holding this webinar on the Traditional Territories, across what is now Canada, of untold generations of Indigenous people. These people include those whom we refer to as First Nations and here in Toronto that would include the Haudenosaunee, in Mississauga the Credit and Huron-Wendat, as well as Metis peoples and in the far North, the Inuit. I just would start with mentioning this because, first of all, it's something that we do more and more, at beginning of meetings, beginning of school, beginning of gatherings, often will have now a land acknowledgement, along the lines of the one I just shared with you. The land acknowledgement, I would suggest, is indicative of change, and as I said, it's all over the place now. You do hear it in schools. It provides information, frankly that I didn't get when I was in school in Toronto back some time ago, and while it's not enough to completely change things it does make everyone who hears it more aware of our history and our shared history as non-Indigenous and Indigenous people, and full disclosure, I'm a non-Indigenous person who grew up in Toronto but just happens to work in this space. So I think it's worth, first of all it's important to start that way, I think, but it's also important as part of this conversation because it indicates some societal, I would suggest, some significant societal change. Societal change, I think along with legal change, is relevant to boards and to their individual members. So I'm going to turn now a little bit and just talk about Indigenous issues and I will say first that the term Indigenous issues doesn't give these matters justice. Doesn't do justice for them as we are all increasingly aware. But these are things that have been with us for hundreds of years and depends on your point of view and who you are in terms of how aware you might be of these issues. If you happen to be Indigenous you probably are extraordinarily aware of them. These issues have probably had real and very significant impact on your life. If you're not indigenous, well, they are things that probably haven't had as big an impact on you and it's probably going to take some time before they do. What has changed though, is in the last 30 years or so, the state of laws surrounding them and also how these issues and our Indigenous friends and colleagues are perceived by society, generally. In the more recent past we've seen the Royal Commissions, the Truth and Reconciliation Commission and the Commission for Missing and Murdered Indigenous Women and Girls and these have brought concerns regarding the mistreatment of Indigenous Canadians to the mainstream press, and frankly, to the cognizance and knowledge of Canadians who only a few short years ago wouldn't have been exposed to these things. Interestingly, the recent, well sadly and interestingly, the recent events, the discovery of the buried children at the Residential School in Kamloops, that's only the most recent example. I found it fascinating that somebody who works in this space, who deals with these things regularly, who is aware and because of the work I do and the people who I am honoured to do it with, these very sad and significant issues. I have been fascinated to listen over the last few weeks as people I know well have said to me things that demonstrate that this most recent event has really increased their awareness of these issues. Frankly, I was shocked. I thought that the Truth and Reconciliation Commission and the various other Commissions, the Missing and Murdered Indigenous Women and Girls Commission, would have already done that but clearly this is piling on and finally seemingly having some effect. So, these concerns are becoming more and more obvious. So, Indigenous issues, as they are increasingly recognized as matters that must be addressed by all Canadians, I'd suggest that this includes corporate Canada, and those individuals who work as directors. Environmental matters, I'm going to turn to environmental matters for a second, and just say that these have been recognized for a relatively long time, frankly, and while environmental matters are somewhat new historically, I suppose, environmental assessment, for instance projects and environmental protection legislation, have both been really around for the last 50 years in some form or another. Of course they're developing more and more. They're becoming more significant, more explicit, more punitive in certain situations, but they've been around for a longer time. They're more a matter of general business than they once were. Certainly when I started work they were already on the board agendas, not necessarily the same way they would be now. Directors needs to be very concerned about environmental matters, as they ought to be, of Indigenous matters as well. Environmental matters are somewhat more explicit, and somewhat more punitive in terms of their implications for directors, and directors have to think carefully about environmental matters and ensure that they're giving them the time to be considered at the boardroom table, and properly assessed in a way that it ensures environmental protection, and frankly, ensures the protection of their corporate interest that they're there to represent at the boardroom table. So I'm going to stop at that point but I'll happily share other thoughts as we move along, Alison.

Alison: Great. Thanks so much, Adam. Shifting gears a little bit we've certainly seen some stories hitting the press lately with respect to shareholder activism impacting board slates, and Brett, in your practice how are you seeing ESG impacting boards?

Brett: Well, Alison, I just wanted to refer the audience to a recent watershed event in which ESG related stakeholder democracy played out in the boardroom of ExxonMobil at it's recent shareholder meeting that was held in late May. ExxonMobil shareholders voted to replace three of the companies twelve directors with directors who are seen as being better suited to fight climate change, bolster ExxonMobil's finances and guide it through a transition to cleaner energy. The proxy contest was lead by a newly created activist fund called Engine No. 1 and it only held .02%25 of ExxonMobil shares as of the record date. They garnered the support from several key institution shareholders such as California State Teachers' Retirement System. ExxonMobil fought this hard. It was an all hands on deck battle. The activist fund's message was that ExxonMobil failed to adequately prepare for the energy transition and they said that oil and gas companies are positioned to capture value in a decarbonizing world were rewarded by the market while ExxonMobil's cost of capital was increasing. If you look at ExxonMobil's performance during 2020, its shares declined by 41%25. Its worst performance in 40 years. It also posted its first annual loss in decades and saw its production drop to as lowest levels since 1999. But in the face of this ExxonMobil refused to meet with the activist nominees. All of them were well qualified to serve as directors. In fact two of the nominees were former CEOs named by Harvard Business Review as among the best performing CEOs in the world. Not just in energy but in any industry, and one of them helped lead an energy transformation in a business that ExxonMobil was pursuing, and Harvard Business Review called that transformation one of the top 20 business transformations of the last decade. It's notable that two of the candidates that ExxonMobil had on its board that were not re-elected included the former Chairman and CEO of IBM and the former President and a group of CEOs of Patronis. With the tiny activist success of winning 25%25 of the board seats the result is seen as one of the biggest activist upsets in recent years. It's also unprecedented in the oil and gas sector and it's a sign that institutional investors are increasingly willing to force large corporations to tackle climate change. In commenting about this the California State Teachers' Retirement System said that this represents a tipping point for companies unprepared for the global energy transformation. While the ExxonMobil board election is the first of a large US company to focus on the global energy transition it will not be the last. If you look around the world this change is happening very quickly and especially in Europe. In late May, France's Total, which is the world's fourth largest privately owned oil and gas company, approved its name change to TotalEnergies, reflecting the companies strategic shift to focus on renewable energy sources. Closer to home, Suncor Energy also recently announced its target to achieve net zero emissions by 2050, which is in line with Canada's commitments under the Paris Agreement. I want to note that boards really should recognize investors are placing an increasing importance on ESG and this is rapidly driving regulatory change. Increasingly investors view environmental and social factors as having an impact on the company's strategy business model, risk management and financial and operational performance and there's a global trend towards responsible investment. More and more money is flowing invest managers that use environmental and social factors to select securities. Last year in 2020 a record 51 billion dollars was invested in sustainable US funds and already in Canada, majority of the assets under management, use some form of responsible investment approach. I think that this trend's going to continue and accelerate as there's going to be huge wealth transfer over the next decade or so, from Baby Boomers to Millennials, who are generally more socially minded. I wanted to point to another letter that was signed by more than 450 asset management firms, including Fidelity and State Street, that was released just last Thursday. They manage over 41 trillion dollars in assets and they're urging governments around the world to set more ambitious emission standards, targets, detailed clear roadmaps to decarbonize pollution in heavy industries and implement mandatory climate risk disclosure requirements. This is the strongest call yet from investors to urge governments to take bolder steps to fight climate change. It basically says the countries that failed to react to this dynamic will be at a competitive disadvantage. We're seeing that, recently the EU and China, recently released more ambitious targets for reaching net zero emissions. With this pressure I think one can be confident that there's going to be new and more stringent regulatory requirements relating to climate change that will be introduced in the near term. Higher emitters will face regulatory penalties, higher taxes and higher financing costs. All this means that green assets will be more valued highly in the future and treated at a premium and brown assets will increasingly trade at a discount. As more and more investors are looking at ESG insights and data they're demanding that there be additional and more ESG related disclosure required for public companies. United Nations and the World Economic Forum have already called for these enhanced disclosures and recently a letter from 180 investors with 2.7 trillion dollars in assets, and other companies such as Apple, Uber and Salesforce, have called on the SEC to improve and mandate climate disclosures. I think this will happen very fast under the Biden Administration and likely, as usually happens, it will filter up to Canada as well and result in additional climate disclosure requirements in Canada. Back to you, Deborah.

Alison: Thanks, Brett, and Deborah, from your perspective as a director sitting on a number of boards, what are you seeing? Why should boards be concerned about ESG?

Deborah: Sorry. I'm on mute. Famous last words. My apologies. So thank you, Adam, for that very heartfelt background on territorial recognition and kind of where we are today. I really appreciate that and, Brett, with your backdrop on shareholder activism and stakeholder at a broader level. Really, one does ask the question is, should I be serving on a board? There's a lot of regulation. It's really complex when it comes to ESG and so I step back in my role as a corporate director in ensuring that the organization, the company that I serve on, that we're leading in some way, or we're leaning in in some way. So one of the areas that I think really was watershed, and really got ESG on the map as well, it's been bubbling up to the surface but corporate boards have been, in the past, focused on shareholder returns. In 2018 one of the global investment management corporations, BlackRock, which I believe, Brett, you referred to very large fund, took a stand on sustainable investing. BlackRock CEO, Larry Fink, basically published an annual letter in January, 2018, where he urged private sector to make a societal impact and a goal to maximize shareholder value. That was really coming out of social purpose and really why the organizations and corporations exist. So he wrote, and I think it's a very pivotal statement, he wrote that, "Public expectations of your company have never been greater. Society is demanding that companies, both private and public, serve a social purpose. To prosper over time, every company must deliver financial performance and show how it is making a positive contribution to society." Companies must benefit all of their stakeholders, and by definition, stakeholders can include shareholders, employees, customers and communities in which they operate. So this was a huge stake in the ground; that from an ESG disclosure and expectation from a director's perspective, what was your role? What is your responsibility? What is your mandate? The element of social purpose is really being scrutinized and Brett and I will talk about that a little bit more with respect to the 360 governance report that was issued by Peter Dey and Sarah Kaplan earlier this year. They set out 13 guidelines. Purpose of a corporation was one of the first guidelines so I think it's stepping back, as a director, and asking the question, "What is our purpose and who are we serving and why are serving those?" So those are pretty basic concepts but they are watershed and it's something that as a director you should be leaning in. The other area that I wanted to kind of focus on, about what directors should be concerned on, Alison, you've referenced the primer for environmental and social disclosure document that was published in August 2020 by CPA Canada and TMX Group. It's a really great document and one of the things they do, they're focus in that is on disclosure on environmental and social, and they gave some areas as boards and as companies from an environmental, what issues you should be addressing or thinking about, if they apply to your corporation or a company that you're involved in, and also the social issues. I just thought I wanted to touch on them because, honestly, until I saw the list some of them I hadn't really put them in a particular category. So in the case of environmental issues, and I know, Adam, you've already touched on some of them but greenhouse emissions, climate change impacts, air quality, energy management, water and waste management, waste and hazardous materials management, land use and ecosystem impact, biodiversity, including deforestation, product design, life cycle management and supply chain environmental issues. Those are just some of the issues from an environmental perspective and may not impact the corporations that you serve on. It may impact some of them but those are the lens and the issues you should be addressing or looking into. On the social issue, everything from human capital management to employee engagement, diversity and inclusion, health and safety, labour practice, human rights, Indigenous rights, product quality and safety, cyber security and data privacy, bribery and corruption and supply chain social issues. Supply chain risk, I want to focus on for a moment, is in the area that can have a huge reputational risk impact on your organization. There needs to be a lot more focus around that and this concept of human slavery or modern slavery bubbled up. Apple had to completely revamp their supply chain in response to allegations that child labour was used in the cobalt that they used when they mined for the ultimate use in their iPhone batteries. So can you imagine as a board having that oversight role? So they continue. So as a board you need to determine, if you have adequate supply chain, you need to have compliance. You need to have audit programs as well as a reputational risk response plan in the event that something like that bubbles up. However on the positive side, companies like Patagonia, outperformed their competitors in part by mitigating risk with a proactive supply chain management technique. For instance, blockchain technology can now be used to track origins of commodities, which is actually a really critical component in your supply chain risk reputation. I just wanted to highlight that area and I wanted to speak to environmental issues and social issues. There's a long list. As a director you want to ensure that your corporation, or your organization that you serve, is addressing the issues that are applicable to your industry. Over to you, Alison.

Alison: Great. Thanks so much, Deborah. We've talked about this a little bit but let's see if we can dig in a little bit more detail into our next broad topic which is what are board member's responsibilities with respect to ESG? Brett, given your experience advising boards, what in your view do board members need to be paying attention to when it comes to ESG?

Brett: Alison, I'd first like to speak about the board's responsibility to pay attention to ESG related risk oversight, and then I'd like to talk about some recent ESG related court decisions that boards should be aware of, to respond to one of the questions we already got on the Q&A. First, let me discuss the board's risk oversight role. This is a key aspect of the responsibility of a board. To ensure that you identify principle risks of the company's business and ensure the implementation of appropriate systems to mitigate and manage those risks. For many organizations environmental and social related risks are critical, especially those obviously in the oil and gas sector. I've already spoken about climate change risks and the potential financial impacts. So boards, along with management, must take appropriate steps to understand and assess the materiality of these risks to their business. This assessment should extend to a broad spectrum of potential climate related risk with a short, medium and long terms. In this context it is no surprise that for next year's proxy season a leading proxy advisor, Glass Lewis, said that they'll be paying more attention to how board is managing environmental and social risks. In its most recent proxy voting guidelines, and I should step back, Glass Lewis advises institutional investors and provides recommendations about how they should vote their shares at public company annual meetings. Glass Lewis states this week that insufficient oversight of material environmental and social issues can present direct legal, financial, regulatory and reputational risk that would harm a security holder interest. They believe that these issues should be carefully monitored and managed by companies and that the companies should have an appropriate oversight structure in place to make sure that they're mitigating these risks and capitalizing on opportunities that come up as well. Glass Lewis plans to hold boards accountable to maintain clear oversight of material risks of the company's operations. They'll be looking for a specific disclosure in proxy circulars next year in respect of this oversight role. Beginning next year, Glass Lewis said that they'll generally recommend that shareholders vote against government's chairs on TSX composite index companies that do not explicitly disclose a boards role in overseeing environmental and social issues. That's a pretty strong statement. They'll also recommend voting against board members that are responsible for the company's failure to properly manage or mitigate environmental or social risks that are detrimental to, or threaten, shareholder value. If there's no explicit board oversight on environmental and social issues that are evident in the disclosure, Glass Lewis may recommend that shareholder's vote against members of the audit committee as well. Now I'd like to talk very quickly about recent court decisions that might be of interest that relate to ESG. The first decision relates to Nevsun Resources Limited, which was a Vancouver based mining company, but the mine, Eritrea, that was subsequently acquired by a Chinese company. In the Nevsun matter, three Eritrean mine workers that worked at the Eritrea mine, who subsequently became refugees in Canada, brought a class action lawsuit against Nevsun in British Columbia Supreme Court alleging they were subjected to forced labour at the mine. The plaintiffs alleged that Nevsun, working with the Eritrean Government, committed gross human rights violations such as slavery, forced labour, torture and crimes against humanity during the construction of the mine. The BC Supreme Court, in 2016, granted the Eritrean plaintiff's application to commence a class action and then Nevsun appealed that decision and lost and subsequently appealed it to the Supreme Court of Canada. Last year the Supreme Court of Canada dismissed Nevsun's appeal and allowed for the plaintiff to bring forward its claim for damages in British Columbia. The Supreme Court of Canada decided that a private non-state actor, such as Nevsun, could be held liable in Canada for its alleged breaches of international law abroad. So that's a fairly significant development for companies and there's a lot of Canadian companies that have international operations. So this will be very relevant to them. I also wanted to speak about a really recent landmark court decision coming out of Holland. In late May the Royal Dutch Shell was ordered by a Dutch court to slash its emissions harder and faster than it planned to do. This really could have far reaching consequences for the rest of the global fossil fuel industry. Shell had already pledged to reduce its greenhouse gas emissions by 20%25 within 10 years and to hit next zero before 2050. The Dutch court thought that wasn't enough. They ordered Shell to slash emissions by 45%25 by 2030, that's 9 years time, compared to 2019 levels and this raises a prospect that Shell will have to radically speed its climate and divestment policies to hit this new target. It's thought they might appeal this decision but certainly it's a landmark decision that's out there right now that you should be aware of. It's thought that maybe this Shell decision could inspire new cases against Canadian energy companies. I bring to your attention Bill C-25, that part of that was already enacted, and it allows the CBC now provides that directors have to act in the best interests of the corporation and that they have to take into consideration a variety of factors, including the environment and the long term interests of the corporation. So those words now are part of what the directors have to consider in the best interests of the corporation. So that certainly opens the door for potential court proceedings against CBC companies. Back to you, Alison.

Alison: Great. Thanks so much, Brett. Moving to our sitting director, Deborah, what are you seeing boards doing to meet the ESG mandate?

Deborah: Thank you and thank you for that backdrop, Brett. I'm going to talk about the two boards that I serve on because they're both unique and different. One is in the Canada sector and one is in crypto Blockchain. I call them the two C's; cannabis and crypto. I'm going to focus on Khiron Life Sciences. First, they're a global medical cannabis focused company, focused on health and well-being for patients. One of the things that they, from the very beginning, is they've put together an ESG framework and the overarching theme is sustainability matters. They're lining best practices with the sustainable development goals, the UN Global Compact, United Nations guiding principles of business and human rights. So there's a lot of overarching principles, and so incorporating that into your frameworks on ESG, one thing they've done is they've identified the eight key stakeholders in that framework. One of the first is government. Government because cannabis is a very regulated industry, as we all know. They are a Latin American based operation so, again, national strategic priorities as a reference from the government in reference to the government of Colombia. Their suppliers, supporting and strengthening local suppliers, and ESG as a constant evaluation in who is part of the supply chain. Then environment. Environment, again, as a key stakeholder, a key concept, is reduction and mitigation of environmental impacts, circular economy and GHG emissions. Local communities is another stakeholder. Another consideration is comprehensive social management and considering win/win strategies for healthy relationships with the local communities in which we operate and share value creation at all times. Then we've got our shareholders and standing with a factual balance communication at all times, trust and transparency in our communication, risk management and sustainable growth. Our employees, our key stakeholder that we're accountable to, we want to attract the best and the brightest and retain and create a culture of honesty, integrity and equal opportunity. Our patients are a stakeholder, providing and improving patient's well-being, further quality of life to the patient and to their families, providing high quality attention and access and service to the products and ensuring patient's safety. The last stakeholder that we have in the overarching ESG framework is our clients and the clients are providing high quality reliable products, best in class customer service, product development driven by technology and innovation and employer branding. So I wanted to highlight that as an example because we talk about corporations, and so from a director perspective, these are areas that we need to report on and disclose and it has been embedded in the culture and the framework from the beginning of ... very proud to be part of that but never to take our eyes off of that and to ensure that we have oversight on all of that. Then the other board I'm on is Taal Distributed Information Technologies. It's a vertically integrated Blockchain infrastructure service provider. Their focus is on a scalable cost effective and energy efficient solutions. On the energy efficiency, there's a lot of conversation going on today in Blockchain technologies, on computational processing and the impact it has on energy. So one of the things that we're working on, inside that organization, is management's putting together a working group. What they're doing is self-assessing the companies E & S disclosures to build a roadmap for enhanced reporting and they're referencing the self-assessment questions as a baseline that are in the primer for environmental and social disclosure documents. So we're working through on that and as Chair of the Nominating Corporate Governance Committee, Brett, I don't want to be one of those board members that have a vote withheld, so I am participating in this working group because it's critical and you don't want the regulators and you don't want shareholders making decisions for you. It should be part of your strategy and your disclosures and you need to definitely lean in. So, that's what we're doing from a Khiron Life Sciences perspective and in the case of Taal.

Alison: Great. Thanks so much for that, Deborah. That's really interesting to hear about what is being done by particular companies with respect to ESG. Moving to our next and final topic, talking a bit about best practices around governance and some emerging issues, Adam, what are some steps that the board should be taking to ensure environmental and Indigenous concerns are being adequately addressed? I know in the beginning you mentioned that there were certain environmental liabilities that board members needed to be aware of. Can you just comment a bit more on that?

Adam: Sure. Thanks very much, Alison. I'll talk a little bit about environment first and I'll switch to Indigenous matters. First of all, I think and mixing up my notes a little bit but I think I've said a lot, but I think the key here is to look for and question environmental risks. Environmental risks can have very big implications for directors and for the companies they direct. It's important that directors make sure that they're properly equipped to address environmental matters. That can be through having resources at the board level. It can be ensuring that the corporate entities have the appropriate resourcing, that is staff or consulting and ensure that they're able to answer these sorts of issues and address them. The driver behind this is, explicitly, is liability. Regulatory liability, whether it's environmental regulatory or securities regulatory liability, is significant and needs to be watched. Also there's this whole backdrop of personal liability for directors. It can be surprising to some directors to learn that their exposure to environmental liability does, and can, extend beyond their time on the board and even beyond the lifetime of an entity. So a company can cease to exist and in certain circumstances the former directors themselves might retain liability that can follow them. So there's significant issues that need to be addressed there and questioning those risks and questioning the board and the executive level to ensure that they're being addressed and considered is essential. On the Indigenous side I think it's a little different. First of all, we're in a slightly different point of view from a legal and regulatory environmental point of view. Interestingly it kind of parallels in some ways the environmental risks that I was describing a second ago. 50 years ago, 40 years ago, environmental risks for directors were not thought to be particularly significant. That's changing or it's changed a lot in the interim period, or intervening period, and I think we are, maybe not 40 or 50 years ago in equivalent in Indigenous matters, but we're not far off that. So what that is to say, we're creeping up on a time when liability for these things is going to increase, I think. So awareness at the board level of them needs to be significant, increasingly, and will continue to be in the future. We might question whether Indigenous board members in certain companies might make sense. Indigenous staff might be a way to go as well in terms of ensuring knowledge and awareness of Indigenous issues within a corporate setting. Failing those two potential changes to board membership and staff, I think that it's important for boards to consider outreach to Indigenous communities and organizations as a way to understanding what they're evolving requirements are. A couple of things are very specific, and as I said, the law is changing here dramatically. The case law of the Supreme Court of Canada has changed a huge amount in the last 30 or 40 years and continues to evolve. But there's also some very real legislative changes coming. First of all, I would just refer to the United Nations Declaration on the Rights of Indigenous People and all that it includes. I won't get into it in great detail expect to say that depending on your area of business this can be a significant document. First of all, it is significant just generally and something that helps to educate those in understanding where this is all going internationally but increasingly UNDRIP, which is an international agreement that Canada signed on to, is being looked to as a part of the Canadian legal framework. There is legislation before Parliament now to make UNDRIP part of the Canadian legal framework and that's expected. It's already happened in BC and we think it will happen Federally. So watch and listen to what's happening. The law will change. It is changing. It is important that we keep on top of that, boards keep on top of that. Finally, the most explicit reference to Indigenous legal issues at the corporate table, I think, is probably call to action #92 of the Truth and Reconciliation Commission of Canada's calls to action. Call to action #92 has a heading and the heading is 'Business and Reconciliation'. I think that all board members would be very wise to read, consider and discuss this call to action. It speaks to the United Nation Declaration on the Rights of Indigenous People that I already mentioned and it speaks to corporate entities and directors and those who are part of corporate Canada understanding these issues and really beginning to be able to work with them and understand what their implications are for, not just Indigenous Canadians, but non-Indigenous Canadians and business in Canada. It's easy to find. If you just Google TRC calls to action you'll find them. They're not hard to find. So when we need to watch and listen to what's happening in society, as I started off with. Things have changed a lot in the last few years. They continue to change faster and faster and like environmental matters I think they're here to stay. I don't think Canada's going to lose its collective nascent understanding of Indigenous issues. I would say, simply put, let's hope it doesn't. Let's hope that this continues and that we continue to make progress. There's a long way to go but our society is moving and our boards are part of our Canadian society. So those are my thoughts, Alison. Thanks.

Alison: Thank you, Adam. Deborah, moving back to you, what tips or thoughts do you have with respect to what boards can be doing to ensure they are meeting their ESG responsibilities?

Deborah: I'm mindful of our time, Alison, so I'm going to be really brief. These are just emerging trends that we're seeing from best practices, governance practices. One thing that came out of the Exxon climate change, as Brett alluded to, is boards should consider appointing a committee of the board to study climate change and work with management to ensure they come back with recommendations to be integrated into the overall business strategy to improve long term performance. So that is one element. Another area that boards can lean in on is creating a stakeholder committee of the board, and Brett will go into more details, but with the 360° Governance report: Where are the Directors in a World in Crisis, that was written by Peter Dey and Sarah Kaplan that was issued earlier in the year, they've got 13 guidelines and stakeholder committees is guideline #6. So a consideration. Then in the area of board diversity and board renewal these, according to recommendations in the guidelines in the, we'll call it the Peter Dey and Sarah Kaplan report, guideline #9 is on board renewal. If we're going to have change we need to see more of a renewal going through on boards because anything after a certain period of time, 10 years plus, is no longer considered independent board members. So you've got to have some renewal mechanisms in your board. Either it's age limits, term limits, performance assessments, to turn over the board. So that's really critical and if you have this ongoing renewal mechanisms then that will create more of a culture and opportunity to bring diversity from a board perspective and there's a lot of research on it makes good business sense to have diversity. There's legislation that requires it. There's shareholder activists that withhold votes if you don't have diversity. So it comes from a whole array of legislation and compliance but at the end of the day, it really boils down to your strategy and your culture, and really from a board perspective you should be driving that diversity because it makes good business sense and it really enhances your decision making when you have diversity of thought around the table. That thought can come from gender, age, racial, geographic and different skills. Obviously being the founder and CEO of Women Get On Board I'm very much about getting more women on boards and that diversity just comes back, time and time again, so really there's no excuses why boards don't have diversity on their boards. They can certainly work harder and it's being demanded of boards if they aren't diverse.

Alison: Thanks, Deborah. I'll just remind the attendees, if you have questions please do feel free to use the Q&A function. We're happy to take questions as we go along. Brett, just building on what Deborah was saying, can you give us just a brief snapshot of what you think is of interest in the Dey report for board members?

Brett: Sure, Alison. I just want to maybe take a bit of time to kind of go into some of the background about the Dey Kaplan report. One of the co-authors is Peter Dey. As most people know he wrote a report back in 1994 called 'Where Were the Directors?' and that report proposed guidelines urging Canadian boards to align with then emerging corporate governance principles, mainly about board independence and oversight. Those guidelines were developed over 27 years ago but they're still adhered to today as best practices. Mr. Dey and Sarah Kaplan, who are the co-authors of this current report, believes that the standards of corporate governance from the 20th century are no longer adequate to address the challenges of the 21st century. We saw one of the comments in the Q&A section of the frustrations about the responsibilities on the board right now. But hopefully some of the guidelines that Mr. Dey and Ms. Kaplan have provided in this report will be helpful in providing a good framework for modern directors to approach the challenges that we face, regarding climate change, systemic racism, economic inequality and Indigenous rights. I'll quickly go over some of the 13 guidelines. Guideline 1, Deborah referred to earlier about the establishment of a corporate purpose, that the board should identify, disclose and regularly review the purpose of the business of the corporation, that addresses all stakeholders, not just shareholders but all stake holders. Guideline 2 emphasizes the board's duty to exercise its power in the long term best interests of the corporation which requires them to take into consideration the interests of the corporation stakeholders. Again, stakeholders not just shareholders. Deborah spoke about getting to know who your stakeholders and setting up a stakeholder committee which are two of the other guidelines. One of the other guidelines, guideline 4, is to pay special attention for engaging and gaining consent from Indigenous peoples, as Adam had mentioned in his presentation. Guideline 7, sorry I'm jumping a bit but I'm just trying to highlight some of the ones that haven't been discussed. Guideline 7 advises boards to develop processes by which all stakeholders can be treated fairly when stakeholder interest come into conflict and the competing interests are resolved. Guideline 8 deals with adopting a compensation policy that aligns with the corporation's purpose and long term sustainability. It recommends that boards adopt metrics that have targets and compensation plans that are aligned to the corporation's purpose. Guideline 9 relates to board refreshment, which was covered by Deborah, and guidelines 10 and 11 relate to diversity, which was also discussed by Deborah. Guideline 12 highlights climate change as a specific risk and opportunity that must be addressed with great urgency and I've discussed this before, the importance of climate change. Finally, guideline 13 provides for board oversight and deliberation about whether or not the company should take a public stand on stakeholder issues. I'd encourage everyone to have a look at the Dey Kaplan report because I think it will play an increasingly important role in the future to guide the development of Canadian corporate governance, the policy and law in the future.

Alison: Great. Thanks, Brett. We have about 8 minutes left and I know there is a question about board composition and, Deborah, you talked a bit about diversity and inclusion and maybe you have some thoughts on this, but the question is basically does board composition have to change to address ESG or how does it have to change to address ESG issues?

Deborah: Maybe I'll take that and then get Brett to weigh in on that as well. So as you can see the board, there was an overturn with shareholder activists in the case of Exxon that said, "Listen. The board members that you have on the slate we don't agree with all of them. You need additional skill sets around ESG, climate change." I think from a board composition I think you have to be mindful of where's the company going, what regulatory compliance and just the overall framework. I would say on your board composition, you have to be planning for the future, not looking behind. So you need to be thinking about where the company's going, what the legislative, what the regulatory frameworks and compliance that you have to address. It's not okay just to pick your golf buddies, let's say, or whoever you want to. Being a corporate director has professionalized. There are a lot of very skilled individuals out there that could be independent board members. So from a composition perspective it really is incumbent upon, typically it would fall under the nominating corporate governance committee to oversee that mandate of the board on the whole renewal process, identifying with a board skill matrix what you currently have, what you're looking for. As directors you can certainly lean in on that and even if you use an external executive search firm to do that, if you don't have a slate of diverse candidates, you push back and say, "This is unacceptable. Try harder." Because there's no excuse to say that you can't get diversity on your board. That diverse candidates are out there.

Alison: Perfect. Thanks, Deborah. Adam, we have some environmental questions for you. I appreciate some of these you may not be able to answer right off the top of your head, but one of them was whether or not you could give examples, or you are aware of examples, of instances or cases where directors were held liable for an environmental issue after their term had come to an end, or the company was wound up or, it ended, basically.

Adam: Sure. Probably the easiest thing for me to do is refer to the first example. The second one gets a little different and has different aspects to it. But in terms of being able to have an example of a case where a director was found to be liable after their term as a director ended, there's one that actually goes beyond that though, I refer to. It was a case that I was involved. It didn't become public but it was a case were a director of a company retired from the board. The company had a great deal of contaminated land in what you might call the Rust Belt in Southern Ontario and the Ministry of Environment was issuing orders with respect to some of the contaminants in those lands that have very significant financial implications. The company had ceased to exist essentially, or effectively had no money any more. It was impecunious. The other directors were out of the country. The former directors. So there were no Canadian directors. The one Canadian director who had remained in the country had passed away so his widow was the only one left with any potential legal ties. Interestingly the Ministry of Environment, this is some time ago now, the Ministry of Environment in Ontario proposed issuing an order against the widow to pay various sums of money related to the contamination. While eventually the Ministry was convinced not to take this action, mainly by the threat of what this might look like publicly if it got to the press, because what I'm sharing with you is actually only part of the story, it eventually went away but the fact was, from a legal point of view, this was an action that the Ministry was capable of taking. The Ministry of Environment does have broad powers in this regard and it's something that can result in the piercing of the corporate veil. It's important to note that directors, while very rarely imposed, there is some potential for penitentiary or for penal time through convictions of offenses for directors. It's not just about potentially fines and war stories like I just conveyed, but also the potential on occasion, in the most serious of circumstances, for jail time.

Alison: So just a follow up, and I appreciate we have about 2 minutes to the end, and I realize that people may have to drop off. We're happy to stay for a few extra minutes to be able to answer some of these questions. There is a request to put a link to the Kaplan Dey guidelines and Brett is I think doing that now. One of the additional environmental issues that we have a question about is I guess sort of on the scope of that environmental liability look like and the question is, is the focus on land use matters or could a board member potentially be accountable for the environmental performance on their buildings? The answer might relate to what legislation is there and what it covers but I think the question generally is what is the scope of these environmental liabilities.

Adam: Yeah, yeah. It's pretty broad. I don't know that it extends, if I understand the question, I don't know that it extends quite to building performance. Unless a building has emissions that emanate from it that are regulated by either the Environmental Protection Act or a perimeter approval that has been issued pursuant to legislation like that, and I'm speaking of Ontario legislation right now. So it is conceivable that you could have emissions that were out of compliance. It's not likely that it's going to be an office building. What I'm describing is probably more likely to be a factory and that would create potential liability. Depending on how you define buildings there is potential for liability related to how they perform. As I say, mainly around emissions is the example I'm thinking of, but you might be able to dream up other examples but contamination of land is a significant source of potential liability for boards and corporate entities. I hope that answers the question a little bit, anyways.

Alison: Great. Thanks, Adam. The last question we have is actually one that I can answer which is about D&O insurance and whether it covers directors on ESG violation claims. The answer is it very much depends on the policy. That is something that as a board director you should definitely be asking to see the D&O insurance policy and to see what it covers because different providers have different coverage. It is not unusual to have some pollution exclusions. Although there can be pollution exclusions there can be coverage for human rights claims. It very much depends. So that's an issue that you should be reviewing the D&O policies, discussing that at the board level and contacting brokers or your insurance company to ensure that you're getting the best coverage, or the coverage that you need for your organization. That was sort of a short answer to a very not straightforward conversation but overall I think that it's a good idea for board directors to review the D&O policies and make sure that they have adequate coverage.

That pretty much brings us to the end of our webinar. Thank you all so much again for coming to this webinar today and thank you to all our panelists. It was a great discussion and I hope people enjoyed it. Thank you.

Algonquin, Mississauga, Ojibway, Cree, Odawa, Pottowatomi, Delaware, and the Haudenosaunee (Mohawk, Onondaga, Onoyota'a:ka, Cayuga, Tuscarora, and Seneca). Anishnabek, , ( Iroquois), Oneida and Haudenosaunee (St Lawrence Iroquois)