2025 Responsible Investing Update

Introduction

NS Partners is pleased to share its fifth annual Responsible Investing (RI) Update, which highlights progress and initiatives from RI efforts over the last year. This report includes features of the firm’s stewardship, engagement and integration activities as they relate to financially material environmental, social and governance (ESG) issues.

As a global asset manager, NS Partners takes its fiduciary responsibility seriously, demonstrated through its fundamental stock selection and comprehensive RI approach. NS Partners believes that ESG factors can have a material impact on investment performance and present unique risks and opportunities for investee companies. As such, ESG factors that are financially material are considered, along with traditional financial factors, as part of the firm’s bottom-up research and stock selection approach.

Evolution of RI at NS Partners

Since inception, NS Partners has considered material ESG factors in its investment process. NS Partners became a signatory to the United Nations Principles for Responsible Investing (PRI) in 2016 and has since developed an RI Policy that aligns with its commitment. NS Partners continues to look for ways to enhance the risk-adjusted returns for its clients, while further developing its approach to integrating material ESG factors in its investment process.

Evolution of NS Partners’ approach to responsible investing​

* Task Force on Climate-Related Financial Disclosures.​
As of September 2025. Chart is for illustrative purposes only and is not drawn to scale.
Source: NS Partners Ltd

ESG Integration in the investment process

By ensuring that financially material ESG factors and their trajectory over time are captured in the investment process, the firm’s policy on RI aligns with the duty to seek the best returns for clients.

Case Study

James Hardie

James Hardie is an Australian-listed buildings materials company, providing exterior solutions for renovation and new-build projects. In March 2025, they announced the acquisition of Azek, a leading player in decking in the United States. NS Partners recognised the strategic logic of this acquisition, broadening the product portfolio and scaling up their US footprint. However, the assumptions on sales synergies, the valuation, the ROIC dilution and the increased leverage at a time of uncertainty were causes for concern. NS Partners attempted to engage directly with the company, and indirectly by feeding back our opposition to the acquisition through sell-side firms. However, the company refused to engage with us or other larger shareholders. Despite significant dilution from the acquisition and opposition to the change in primary listing to the United States, James Hardie shareholders were denied a vote on the transaction. The deal was finalised despite the significant criticism of the waiver secured to avoid any shareholder vote. NS Partners felt that governance shortcomings, the lack of transparency and unwillingness to engage with shareholders, combined with the ROIC dilution from the transaction, was too great a risk and the position was sold. Subsequent to the sale, in August 2025, James Hardie issued a significant profit warning further reinforcing the firm’s view that management was not acting in shareholders’ best interests. Shareholders voted against the re-appointment of the chairperson in a recent AGM, further demonstrating their dissatisfaction with management.

Industry Collaboration

NS Partners participates in collaborative engagements and initiatives to pool resources and speak with a stronger unified voice to protect the interests of shareholders in the companies in which it invests on behalf of its clients.

NS Partners is a supporter of the Task Force on Climate-Related Financial Disclosures (TCFD)* recommendations. In May 2025, NS Partners published its inaugural TCFD-aligned disclosure outlining the firm’s approach to identifying, assessing and managing climate-related risks in its investment process.

*The TCFD disbanded in 2023, having been incorporated into the IFRS’s ISSB standards.

 

Since 2020, NS Partners has been a member of Climate Action 100+, an investor initiative to engage the world’s largest corporate greenhouse gas emitters on their action on climate change. As part of this initiative, NS Partners continues to participate in the collaborative engagement with Lockheed Martin Inc.

NS Partners is a supporter of the International Corporate Governance Network (ICGN) through its affiliation with member Connor, Clark & Lunn Financial Group (CC&L Financial Group).

In February 2016, NS Partners became a signatory to the PRI initiative. As signatories, NS Partners has committed to adhering to the six principles and to transparent reporting on its ESG activities in accordance with the PRI reporting framework.

NS Partners is pleased to share its 2025 PRI Assessment Summary Scorecard, which reflects the progress made in its ESG activities. NS Partners is ranked at or above the median in all measurement categories, and improved on the Policy Governance and Strategy module score from 2024.

Source: PRI Association

*The Assessed Modules provided are based on the UN PRI scoring methodology for the 2025 Reporting Framework. The PRI Reporting Framework is based on responses provided by signatories for the preceding calendar year which are captured in their PRI Transparency Report. NS Partners’ PRI Transparency Reports are available at unpri.org. NS Partners’ 2025 PRI Assessment Report is available on request. More information on the 2025 reporting period is available here.

Climate change

As supporters of the TCFD, NS Partners is committed to measuring and disclosing the carbon footprints of its core funds.

Portfolio carbon footprint

During the reporting period, most of NS Partners’ funds outperformed the benchmark in terms of its carbon intensity and weighted average carbon intensity (WACI). While the carbon footprint of its portfolios is an outcome of its investment process and not specifically targeted, the carbon intensity metrics for most of the following portfolios shown in Figure 1 below are relatively lower than their benchmarks. It is noted that the International Equity Fund and European Equity Fund saw increases in carbon intensity and WACI relative to their benchmarks primarily due to greater exposure to carbon-intensive sectors such as industrials and materials. However, analysis of the individual holdings within materials and industrials shows that with very few exceptions the portfolio holdings deliver lower emissions intensity when compared to their peer group.

Figure 1: Portfolio carbon exposure overview

Source: Institutional Shareholder Services Inc. (ISS) for the reporting period – as of September 30, 2025, in USD.

Stewardship and engagement

Stewardship and engagement are key components of NS Partners’ active ownership efforts. NS Partners believes that commitment to RI cannot be fulfilled by analysis alone. We believe engagement with the companies we invest in is crucial to deepening our understanding and driving improvements on material ESG risks or opportunities.

As an affiliate of CC&L Financial Group, NS Partners receives support from the centralised Stewardship & Engagement (S&E) team. The S&E team supports NS Partners’ investment managers on engagements with investee companies, participation in collaborative initiatives with like-minded investors and the facilitation of proxy voting.

In 2025, NS Partners began overseeing a project with the S&E team to develop an annual focus list of companies with which to engage. The companies are selected based on a quantitative and qualitative analysis, which includes an assessment of the company’s exposure to ESG risks and opportunities, ESG performance, significance of ESG incidents or controversies and other holistic considerations. This project is on-going and is expected to begin discussions with issuers in 2026.

Proxy voting

NS Partners has a fiduciary duty to vote proxies both in a timely manner and in the best interests of its clients. NS Partners’ proxy voting policy is based on the central tenet that good corporate governance enhances long-term shareholder value.

As a signatory of the UN PRI, NS Partners considers ESG implications in its proxy voting. For specific proposals related to ESG, issues will be reviewed and analysed on a case-by-case basis. NS Partners will generally vote in favour of proposals that seek to: improve disclosure of environmental risks, improve transparency regarding social issues and favour proposals that encourage good governance and greater independence – provided it is in the best interest of shareholders.

Over the past year, NS Partners voted at 484 company meetings and voted against management on 7% of the 6,142 proposals it was eligible to vote. Additionally, NS Partners supported 23% of shareholder proposals it was eligible to vote. See Table 1 for the proposals voted by category.

Figure 2: Total proxy votes

Source: ISS for the reporting period 01 October 2024 to 30 September 2025.

Proxy-voting highlights

Table 1 – Votes against management and ISS by proposal category

Source: ISS for the reporting period 01 October 2024 to 30 September 2025.

*Votes against ISS indicate where NS Partners’ vote instruction deviated from ISS’ benchmark voting policy.

Proxy-voting examples

Larsen & Toubro Limited

In March 2025, NS Partners supported two proposals concerning related-party transactions and risk allocation in joint ventures at the annual meeting of Larsen & Toubro, an India-based multinational engineering and construction company. NS Partners engaged with the company to clarify the terms over project timelines for thermal power plants, which depend on formal contracts following limited notices to proceed from government-run power producers. On risk allocation, the company confirmed its financial commitments aligning with its 51% joint venture ownership stake, supported by its joint venture partners. While some disclosure concerns remain, NS Partners found the justifications reasonable and supported the resolutions, recognizing governance safeguards.

Hyundai Mobis Co., Ltd.

In March 2025, NS Partners voted against a director election at Hyundai Mobis, a South Korea automotive company, over concerns regarding the company’s board independence and the proposed nominee as an inside director. NS Partners engaged with the company and highlighted governance risks stemming from Hyundai Mobis’ close ties to affiliated companies which raised concerns about the board’s ability to exercise objective oversight and safeguard shareholder interests. While Hyundai Mobis emphasized the nominee’s technical expertise, strategic contributions and leadership in advancing key growth initiatives, NS Partners decided to vote against management based on the lack of sufficient board independence which may raise further concerns on reduced shareholder oversight and potential conflicts of interest.

Hannover Rueck SE

NS Partners voted against management at the German reinsurer’s 2025 annual meeting on proposals including the management board’s remuneration policy and holding virtual-only shareholder meetings. NS Partners engaged with Hannover Rueck and the company outlined its efforts to enhance transparency and align its compensation philosophy with market expectations. Concerns remained around the structural flexibility embedded in the remuneration framework, specifically how the short-term incentive plan allows for above-market norms, discretionary adjustment by the supervisory board and the long-term incentive is based solely on relative total shareholder return, with partial vesting possible even in cases of significant under performance. Additionally, the company had not held an in-person annual meeting since 2019, and the proposal to extend virtual-only meetings until 2027 lacks clear commitment to transition back to in-person or hybrid formats, which are increasingly seen as best practice across Europe.

Microsoft Corporation

NS Partners supported a shareholder resolution at Microsoft’s annual meeting in December 2024, calling for the US-based technology multinational to report on AI data sourcing. While the company faces increased risks related to copyright infringement, it still discloses information about its assessment of AI risks more generally. Despite this proposal only receiving 36% of shareholder approval, given the rapid advance and adoption of generative AI technologies, NS Partners felt that shareholders would benefit from greater transparency on risks related to how the company uses third-party information to train its large language models.

Engagement

Approach to engagement

NS Partners engages with management of the companies in its portfolios and the broader investment universe as part of the investment research process. Portfolio managers regularly meet with management teams of investee companies and review strategic and operational objectives, including relevant ESG issues. The S&E team also supports the investment team on engagements with investee companies on ESG concerns.

In 2025, NS Partners introduced an enhanced to its engagement-tracking process, utilizing an online platform to gather more granular detail on the engagements with issuers undertaken by the International Equity Team. This allows for increased information sharing across teams, greater transparency and disclosure on topics covered, and improvements on the team’s ability to track, monitor outcomes and report on ongoing engagement efforts.

The new process was introduced late February 2025 and over the period to 30 September 2025, NS Partners’ International Equity Team conducted 143 engagements with 126 issuers where ESG issues were discussed. Figure 3 below highlights the most common topics by ESG pillar discussed during these engagements.

Figure 3: Engagement breakdown by ESG Pillar

*Source: NS Partners Ltd.

Engagement examples

Cellnex Telecom SA

NS Partners engaged with management at Cellnex, a Spanish telecommunications company, on several occasions throughout 2025. One key topic of discussion was that of capital allocation, currently the company has an ongoing share buyback program, despite high levels of debt. NS Partners felt that management should be prioritising debt reduction over share buybacks, a view expressed to the management team by NS Partners and other investors. However, the company continued to split their strategy, combining a SBB with debt restructuring. NS Partners felt the strategy did not reduce leverage sufficiently and was not addressing shareholder concerns. NS Partners eventually exited the position.

JPMorgan Chase & Co.

NS Partners engaged with JPMorgan Chase in November 2024 as part of the company’s offseason shareholder engagement to discuss topics of governance, executive compensation, climate targets, human capital development and Indigenous rights. The company provided updates on their board governance, including CEO succession planning, and outlined their approach to executive remuneration and highlighted the disclosure of their new Energy Supply Financing Ratio. NS Partners shared broadly positive feedback across these topics, especially on the company’s disclosure of its new Energy Supply Financing Ratio and progress on their climate targets, while highlighting Indigenous rights and employee satisfaction survey results and outcomes as areas where disclosure could be improved. The company was receptive to the feedback and acknowledged the need for increased disclosure in both areas, noting that they are in the feedback-gathering stage on Indigenous rights from other shareholders.

PT Bank Rakyat Indonesia (Persero) Tbk

In March 2025, NS Partners engaged with PT Bank Rakyat, one of Indonesia’s largest banks, ahead of its annual meeting to assess governance and shareholder protection concerns. The bank provided further clarification regarding the proposal on Bad Loans receivables, and outlined that the total loan amount affected had been fully written off and reserved for over five years, indicating no new financial burden on shareholders and as such NS Partners decided to support management on this organization-related proposal. Moreover, NS Partners noted concerns regarding the company’s share repurchase program and on the proposed changes to the boards of the company. After consideration, NS Partners voted against management on certain capitalization-related and director proposals given the lack of transparency on its employee and board stock ownership plan allocation, due to rising dilution risks and insufficient disclosure on nominee qualifications and independence.

MSCI ratings

An analysis of NS Partners’ portfolios based on MSCI ESG ratings suggests scoring of representative mandates across all categories is ahead of their respective benchmarks as seen in Figure 4. As part of its approach to the integration of ESG factors, NS Partners continuously monitors on an ongoing basis for significant deterioration of a stock’s MSCI ESG score or momentum, any material change in ESG related risks or controversies and, when applicable, this information is reviewed in the monthly stock meetings.

While the MSCI ESG scores of NS Partners’ portfolios are an outcome of the firm’s investment process and not specifically targeted, NS Partners believes its investment in high-quality issuers and industry leaders has contributed to its higher MSCI ESG Scores compared to the benchmark.

Figure 4: Weighted-average ESG score

Source: MSCI Data as of 30 September 2025.

Figure 5: ESG ratings distribution

Source: MSCI Data as of 30 September 2025.

Governance summary

As advocates for good corporate governance, NS Partners continues to monitor various governance metrics and performance of our investee companies. Below is a look at the progression in female representation on boards, and the proportion of companies with separate CEO and chair roles in the past three years. Whilst there has been a marginal decline in female representation on the boards of investee companies during the reporting period, NS Partners continues to monitor metrics for any significant deterioration of ESG scores into the future.

Figure 6: Average female representation on Board of Directors

Source: MSCI Data as of 30 September 2025.

Figure 7: Issuers with separate chair and CEO

Source: MSCI Data as of 30 September 2025.

Corporate Social Responsibility

CC&L Financial Group is committed to being a responsible corporate citizen and strives to have a positive impact on the communities where its employees live and work. Its business practices should consider the impact on the workplace, community and society. In addition, through Connor, Clark & Lunn Foundation (CC&L Foundation), there is a focus on philanthropic and volunteering initiatives. Below is a summary of some of the initiatives undertaken by CC&L Financial Group over the last 12 months.

Culture of inclusion at CC&L Financial Group

To ensure employees feel a sense of belonging, the firms strives to foster a culture that unites people of diverse backgrounds and perspectives, in an environment where everyone has the opportunity to achieve personal and professional success. Over the last 12 months, CC&L Financial Group focused on education, communications and events to promote a culture of inclusion, celebration and learning throughout the year. Some examples include:

• Observed and celebrated Black History Month, Lunar New Year, International Women’s Day, LGBTQ2S+ Pride Month and National Day for Truth and Reconciliation.
• Promoted the 4 Seasons of Reconciliation Course across the company. This course describes the foundation of the relationship between Canada and Indigenous peoples and promotes a renewed relationship through education.
• Communicated and encouraged voluntary participation in the demographic data collection project. About 50% of employees across CC&L Financial Group have completed the survey.
• Updated employee engagement survey to begin linking employee data while ensuring anonymity of responses. This approach will increase the ability to evaluate how different groups see their work experience with the firm.

Environmental stewardship at CC&L Financial Group

CC&L Financial Group believes that actions contribute to the vitality of the environment, and is committed to undertaking initiatives that support ongoing environmental stewardship. Over the last 12 months, the Environmental Stewardship Committee has focused on the following initiatives:

• Continued to measure and monitor the GHG emissions generated through our business activities.
• Continued to monitor developments around collaborative initiatives.
• Provided education regarding the sustainability practices of our major travel partners so that individuals can consider this information in making travel choices.
• Provided education on low-emission commuting solutions and centralised information on office service amenities to create awareness of environmentally friendly options.
• Delivered events and communication circulars to promote a culture of environmental consciousness such as the Earth Month Personal Carbon Footprint Faceoff and Bike-to-Work Week.
• Continued to develop a paper waste reduction strategy relating to trade confirmation receipts and other materials provided by third-party partners and vendors.

Health and wellness at CC&L Financial Group

CC&L Financial Group believes the health and well-being of the people who work at the firm is critical to maintaining collective performance. The firm is committed to undertaking initiatives that support a safe and healthy work environment within a culture where everyone feels secure and supported. The Health & Wellness committee focused on the following initiatives over the last 12 months:

• Hosted Health and Wellness Month, which included workshops on topics such as “the power of embracing failure” and “the benefits of meditation.” In addition, a company-wide fitness challenge was held where participants collectively took over 23 million steps to travel 16,895 kilometres. This challenge was a fantastic way to motivate employees to get active.
• Launched CC&L Financial Group’s inaugural Canada-wide participation in the Terry Fox Run, with over 100 enthusiastic participants. Thanks to participant efforts, over $31,000 was raised for cancer research, including generous donation matching from CC&L Foundation.
• Promoted Mental Health Month, by learning from experts about ways to manage stress, talk about mental health and be present in your body to connect mental and physical health through a variety of in-person and virtual workshops.
• Supported several employee-led health and wellness activities, including teams of participants in the Bay Street Hoops charity basketball tournament as well as the Ontario Ride to Conquer Cancer.

Connor, Clark & Lunn Foundation

CC&L Financial Group aims to enrich the communities in which its employees live and work by creating opportunities for both philanthropy and volunteerism through CC&L Financial Group and its affiliates in support of causes that are important to clients, employees, partners and stakeholders. CC&L Foundation provides support to a broad range of organizations that focus on promoting a better environment, improving education, advancing science and medicine, creating stronger communities and encouraging the arts. Over the last 12 months, CC&L Foundation supported a broad range of philanthropic and volunteer opportunities, some of which are highlighted below:

• Participated in The Grand Défi Pierre Lavoie 1000 km team cycling event in Quebec, a fundraising initiative that aims to promote healthy life habits among young people and to support research on orphan hereditary diseases.
• Provided support through the Canadian Red Cross and the Jasper Community Team Society to those impacted during the Alberta wildfires.
• Organized an employee-led Week of Giving campaign focused on strengthening communities, alleviating poverty and addressing food insecurity. This initiative supported CC&L Financial Group’s community partners, including the United Way. This firm-wide initiative has raised almost $8 million over 20+ years.
• Made a multi-year commitment to BC Children’s Hospital Foundation and its Heart Centre program to purchase essential medical equipment to support children across the province who face serious injuries and illnesses.
• Participated in the CanSupport Dragon Boat Race to raise awareness and funds for the Cedars Cancer Foundation to improve the quality of life of cancer patients and support fundamental research initiatives.
• Aided students through bursaries and scholarships, including Concordia University and Carleton University’s Women in Finance programs, Indspire’s Building Brighter Futures program, the National Educational Association of Disabled Students and the Onion Lake Education Trust Fund.
• Held an internal fundraiser to support inclusivity and allyship during Pride Month, with donations directed to Rainbow Railroad.
• Participated in a Canada-wide blood drive campaign in partnership with Canadian Blood Services.
• Provided support to the United Way British Columbia Kapwa Strong Fund, created to provide immediate and long-term support to those directly impacted by the tragic events at the Lapu Lapu Day Festival on April 26, 2025.