CORPORATE ENGAGEMENT FOCUS LIST 2017

At NEI Investments, we are committed to using the special rights that come with shareholder status to expand the universe for responsible investment and create positive change on behalf of our investors. Our objective is to seek opportunity and reduce risk to the long-term investment value of companies from environmental, social and governance (ESG) challenges, while helping to build an economy that works for people and the environment.

YOU CAN’T CHANGE A COMPANY YOU DON’T HAVE A STAKE IN

• Targeted, in-depth dialogue on material ESG issues• Engaged proxy voting based on guidelines promoting sustainability and good governance, with outstanding disclosure• Constructive criticism to companies on their corporate governance and compensation practices - “Feedback on Proxy”• Responding to proactive requests from leading companies for investor perspective on sustainability • Public policy engagement on corporate regulations and standards to create sector-wide and economy-wide change • Participation in multi-stakeholder initiatives to find practical solutions to sustainability problems

CORPORATE ENGAGEMENT DONE DIFFERENTLYOur comprehensive strategy covers all our funds. Depending on the type of fund, engagement will include:

Over more than 15 years of corporate engagement, we have seen significant progress at many Focus List companies. But change doesn’t happen overnight. Our aim is that the ESG performance of leadership companies will become the norm, while the leaders continue to explore new frontiers in sustainability.

A 2016 Harvard Business School study found that engagement by shareholders on material environmental and social issues was associated with subsequent increases in company value.1

The centrepiece of our corporate engagement strategy is the Focus List – an annual program of targeted, in-depth dialogues on ESG topics.

THE FOCUS LIST

Dynamic response• Integrated in-house ESG team allows rapid corporate engagement response where

risks and opportunities are identified through on-going monitoring of holdings• Flexibility to adapt engagement strategy to changing circumstances

Extensive reach – a minimum of 50 companies each year• Strategic Dialogues with sector leaders capable of breakthroughs in corporate

sustainability practice and disclosure, and with sector laggards that need to catch up with the leaders

• Tactical Dialogues launched during the year in response to emerging risks and opportunities and at companies facing ESG challenges

Multi-factor selection criteria• Investment exposure – the scale of holdings within our funds• Risk and opportunity exposure – the significance of the environmental, social and

governance (ESG) issues identified• Impact potential - where our intervention is most likely to result in change

Transparency• Focus List published at the start of the year• Quarterly and annual reporting on progress

takes time - but it’sEngagement

worththe effort

Getting real about the energy transition

Good corporate governance is the foundation for environmental, social and financial outperformance, and we will continue to deliver feedback to companies on a range of issues: urging companies to mitigate financial and reputational risks associated with their tax strategy; highlighting the value of ESG expertise and identity diversity on boards, including representation of women and minorities; and asking for executive pay to be linked to performance on key sustainability issues, and for companies to curb excessive executive compensation and ensure compensation is equitable for all employees. We will also prioritize communicating investor expectations on ESG to smaller, newly-listed and emerging markets companies.

We draw on established norms and standards to define our responsible investment approach, including the global Sustainable Development Goals, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines, the corporate responsibility standard endorsed by the Government of Canada.

What guides us? Environmental:

ENGAGEMENT GOALS & THEMES

Social:

Governance:

2017 promises to be an important year in the move from fossil fuel dependency to a low-carbon energy system. The Financial Stability Board Taskforce on Climate-related Disclosure will set new expectations for investors and issuers to communicate their response to the climate challenge. We will be asking companies on supply and demand sides of the energy equation to articulate how climate change presents risk or opportunity for the company, intensify efforts to reduce emissions, and participate constructively in the policy debate. We will further our dialogue with oil and gas companies on their strategy for a low-carbon future, and with financial holdings on the sector’s role in facilitating the energy transition.

Responsibility to respectAll companies should implement human rights due diligence consistent with the UN Guiding Principles. We will press extractives companies to apply the principle of free, prior and informed consent (FPIC) of indigenous peoples to project development, while in the consumer sector responsible supply chain management and addressing labour rights abuses will remain a key focus. With financial holdings we will continue to explore human rights concerns in lending and investment. We will build capacity to engage on the emerging issues of cybersecurity and digital rights. Political instability in 2016 provided further impetus for our focus on inequality of income and opportunity as a systemic social and economic risk.

Food from farm to forkSustainable food production and distribution is fundamental to strong economies. We will continue to explore environmental and social risk in the food supply chain, focusing primarily on access to nutrition and labour rights in the agricultural supply chain.

Making pharma betterThe health care sector has great potential to contribute to sustainable development, but controversies continue to make headlines and create risk to value. We will focus on pharma ethics, including product safety, access to medicine, drug pricing and governance concerns.

A recent study by NEI sub-advisor Hermes found companies with good or improving corporate governance significantly outperformed peers with poor or worsening governance.2

Business

GoodGovernance Matters

• Innovation• GHG emissions reduction & progressive climate policy• Responsible water use• Biodiversity protection• Waste reduction

• Respect human rights• Safe and healthy workplace • Positive impact on communities

• Independent board of directors with diverse perspectives • Equitable compensation linked to ESG performance • Responsible tax strategy • Anti-corruption• Transparency

Governance

= Good

BMO CIBC Royal Bank of Canada Scotiabank TD BankWells Fargo Laurentian BankCanadian Western Bank

STRATEGIC SECTOR GOALS Position for the energy transition, focus on innovation. Play a progressive role, support effective environmental regulation while going beyond compliance in performance. Respect human rights, have a positive relationship with indigenous communities, following the FPIC principle.

STRATEGIC SECTOR GOALS Address environmental and social risks in the supply chain, as well as in the company’s own operations.

STRATEGIC SECTOR GOALS Provide services that meet social needs. Avoid risk-taking that can damage the economy as a whole. Take environmental and social impacts into account in lending and investment.

CORPORATE DIALOGUEIn 2017 we will pursue dialogue with a minimum of 50 companies, including:

Canadian Natural Resources Cenovus Exxon Gibson Energy Suncor

ATCO/Canadian Utilities

Agrium / Potash

BCE

Aritzia Canadian Tire Coca-Cola Dr. Pepper Snapple Lassonde Leon’s Loblaw Metro Pepsi Restaurant Brands

Eli Lilly Johnson & Johnson Merck PfizerRocheThermo Fisher

Healthcare

IT & Telecoms

Materials

Utilities

ENERGY

ENGAGING FOR SUCCESSWe believe all fossil-fuel energy companies should be disclosing to their investors how they are preparing for the transition to a low-carbon economy. In a North American first, Suncor supported our shareholder proposal on strategic resilience in a carbon-constrained future. The proposal received over 98% support at the 2016 AGM. In 2017, we will follow up with Suncor on implementation of the proposal and work with Cenovus on similar disclosure. We will also explore Exxon’s willingness to make good on 2016 public statements in support of carbon pricing.

ENGAGING FOR SUCCESSSince the Rana Plaza disaster in 2013 we have been urging Canadian retailers to provide robust disclosure on supply chain management processes and performance - an area in which they appeared to lag international peers. Responding to collaborative engagement, in 2016 Canadian Tire released a Sustainability Report with new information on source countries, supplier audits and participation in Bangladesh factory safety efforts. In 2017 we will work with stakeholders - peer investors, civil society and leading retail companies including Canadian Tire and Loblaw - to advance supply chain due diligence expectations across the sector.

ENGAGING FOR SUCCESS2016 saw increasing focus on how financial institutions influence sustainability performance in other sectors. We will deepen our dialogue with the Big 5 Canadian banks on environmental and social risk and opportunity in lending and investment, including response to the Financial Stability Board climate recommendations and OECD guidance on human rights due diligence for financial institutions, as well as continuing to explore risks associated with income inequality and excessive compensation. In the wake of the unauthorized accounts scandal we co-filed a shareholder proposal at Wells Fargo calling for a business ethics review, and will continue dialogue with the company alongside U.S. colleagues.

CONSUMER

FINANCIAL

We will give special attention to:

• Capacity of the board to supervise on material ESG risks and opportunities, with a focus on the Financial Stability Board climate recommendations.

• Board diversity performance, diversity targets and director recruitment processes.• Excessive compensation at North American companies.• Japanese companies across the corporate engagement program, particularly in support of recent governance

initiatives in the market relating to board independence and diversity.

PROXY VOTING & “FEEDBACK ON PROXY”

• 2016 saw the ratification of the Paris Climate Agreement and the adoption of new carbon-pricing policies by Canada and Alberta. We played a convening role in communicating investor perspectives on the need for policy certainty to federal and provincial governments. We will continue this work, focusing on the Financial Stability Board climate recommendations.

• Alberta responded to engagement by adopting diversity disclosure requirements for public companies in 2016. We will engage BC to join this initiative.

• In 2016 NEI Investments was the first Canadian financial institution named to the international civil society “Hall of Fame” for its cluster munitions policy. We will seek to have the investment prohibition under Canadian cluster munitions legislation clarified and better communicated.

• We will sit on the board or participate in working groups at the International Institute for Sustainable Development, the International Corporate Governance Network, the Principles for Responsible Investment, the Boreal Leadership Council, the Canadian Coalition for Good Governance, and the Responsible Investment Association of Canada.

• We will play a convening role for Canadian investor collaborative engagement, on board diversity and supply chain.

• We will participate in international investor collaborations including:

We collaborate with peer investors and other stakeholders where this will allow us to advance ESG policy, practice and performance more effectively.

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As well as conducting our own research, through engagement we support ainitiatives to benchmark corporate performance on ESG issues. The Access to Medicine Index compares how the largest pharma companies are making essential medicines available in low- and middle-income countries. The Access to Nutrition Index rates food and beverage companies on nutrition-related policies, practices and disclosures.

° Access to Medicine (through the Interfaith Center for Corporate Responsibility - ICCR)

° Access to Nutrition (ICCR) ° Sustainable Stock Exchanges (through the Principles

for Responsible Investment - PRI) ° Labour Standards in the Supply Chain (PRI) ° Responsible Corporate Tax (PRI) ° Cybersecurity (PRI) ° Greenhouse Gas Footprint (PRI) ° Arctic Oil & Gas

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For updates on the progress of our Focus List dialogues and other corporate engagement activities:

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PUBLIC POLICY

COLLABORATION

1 Source: corpgov.law.harvard.edu/2016/07/25/shareholder-activism-on-sustainability-issues/

2 Source: www.hermes-investment.com/ukw/responsibility/