Stantec Inc. (STN) Earnings Call Transcript & Summary

Okay. I'd like to welcome Everyone to this TD Securities-hosted ESG Speaker Series with Stantec today. For those of you that don't know me, my name is Michael Tupholme, and I cover Stantec and the broader engineering and construction sector on behalf of TD Securities from a research perspective. Very pleased to be joined today by Gord Johnston, President and CEO of Stantec; and Theresa Jang, Executive Vice President and Chief Financial Officer of Stantec. In terms of format, Gord and Theresa are going to run through a short slide deck and make some opening remarks, after which, we'll engage in some Q&A. I'll lead the Q&A discussion. But to the extent that anyone that's attending today's session does have a question, please use the chat feature on your screen, and I will be pleased to ask your question on your behalf anonymously. With that said, Gord and Theresa, I will turn it over to you. And again, thank you very much for joining us today.

Great. Well, thanks, Michael, and thanks, everyone, for the opportunity to speak with you today. As always, just a reminder that our conversation today is going to make reference to some forward-looking statements. Stantec is a global leader in sustainable engineering, architecture and environmental consulting. And we continue to stand out as a top-ranked firm in our space for sustainability. In addition to being named the Fifth Most Sustainable Company in the world by Corporate Knights this year, we consistently come out on top in sustainability ratings across multiple independent third parties. We're ranked as a climate leader with an A- score by CDP, formerly the Climate Disclosure Project, and we're the only firm in our space that's achieved that rating for the last 3 years. As you can see on the slide, our ISS ESG quality scores continued to outperform our peers year after year, and Sustainalytics ranks our ESG risk as low, which again is top of class. So we've continued this leadership by committing to be carbon neutral for 2022 emissions and to be net zero by 2030. And the science-based target initiative has recently validated our 2030 emission reduction targets and determine that they're in line with the 1.5-degree C trajectory. And so the science-based target initiative is the most comprehensive and globally recognized standard for emissions management. And they're going to be soon releasing their standard for net zero. And in fact, I think they might be rolling out today or even actually right now as we're in this call. So we find that our -- overall, our skills and expertise continue to play a key role in the global pursuit of a more sustainable future. And our communities and clients are relying on us now, more than ever, to address their impacts of climate change, water scarcity and fortifying their critical infrastructure. So sustainability isn't something that's new for us here at Stantec. It's been really part of our DNA for decades. And so often, as we talk about E, S and G, we -- people focus on the E and neglect a little bit the S and G. So what we thought we'd do is start talking about governance. And so we continue to be a leader in governance, and it starts with our diverse Board of Directors, largely independent and coming from exceptional backgrounds, very, very accomplished industry leaders and experts in sustainability mergers and acquisitions, risk assurance; risk management security; and importantly, foreign affairs as we become even more and more global. So we believe that strong governance helps us drive and protect shareholder value. And while these high standards of business conduct or model from the top, we also require on an annual basis that each employee take ethics and cybersecurity training. One thing that I think is a differentiator for us is that we recently achieved the ISO 27001 Certification for Information Security, which is the globally recognized gold standard for cybersecurity. And so we think that growing with the growing importance of cybersecurity, a lot of our clients and our partners are preparing to implement that certification, but this really is a differentiator for us. So we still believe that sustainability is moving through the fabric of our company, from our Board to the C-suite, through the talented professionals, who we have delivering these solutions to our clients every day. Our -- we have a Board level Sustainability and Safety Committee that has ultimate oversight for our ESG commitments and our performance. And then we have -- underneath that, we have an executive ESG, [indiscernible] 3 members of our C-suite and is actually Chaired by Theresa. And this committee is accountable for our sustainability performance and communicates our ESG knowledge, performance and initiatives back and forth to the Board. And then finally, our Vice President of Sustainability, Carrie Sabin, then takes that information and coordinates with our functional services teams, our operational groups, and they monitor their performance. So I think what's important, as you can see from the board to the C-suite all the way through our operations, ESG is really top of mind. And we do have -- we're often asked about do we have scorecard metrics that impact executive comp, and we do. We have scorecard metrics on inclusion and diversity, employee retention, health and safety and quality. And my scorecard also includes measurement to our carbon commitments. On the social side, we're committed to continuing and expanding our social leadership and long-term support for the black, indigenous and people of color communities around the world. And we've been engaged with for many years with organization that further the interest of these communities through our community investment fund. And we've committed to donating over $15 million over the next 5 years from a community engagement perspective. And to ensure that we're making a long-term impact, we've engaged with our internal inclusion and diversity councils to develop the right areas of support to make sure that we're targeting our funding in the right area. We're focused on gender equality through our organization and ensuring we're providing an engaging and rewarding workplace. So as a result, as you can see on the slide here, Stantec is included in the Bloomberg Gender-Equality Index, the Jantzi Social Indexes, and we've been named a Best Employer for Women and Diversity by Forbes. Our most -- really important contribution to sustainability is in the area of the work that we do for our clients, so our employees, our innovation office. And we're evolving and we're leveraging new technologies all the time to serve -- to solve some of the most intractable problems that we're finding our clients are encountering when it comes to the environment and emissions and contamination and so on. So what we've done, to track our contribution to sustainability, we've begun reporting our revenue on work that supports the UN Sustainable Development Goals or the SDGs. And we're the first company in our space to do this. And we're glad that other companies are beginning to follow [indiscernible]. In 2020, this work accounted for more than 49% of our overall gross revenue. So we expect our contributions to these each SDGs to fluctuate year-on-year base for the type of work that we're doing. But overall, we expect this percentage is going to continue as it moves forward. So we all often get asked by the investment community and our clients, which SDGs are we prioritizing for growing our revenue? So in fact, we like to kind of flip that. Because it's not really our clients -- it's not really us that are driving where we're going from an STG perspective, it's our clients, the type of work that they ask us to do. So a recent example of this is with Hurricane Ida. It not only validated the pump station, the levy design, the flooding work that we did around New Orleans in the previous, but it also resulted in immediate discussions about with some of the neighboring parishes in Louisiana about the type of work that we can do for them, with the Metropolitan Transportation Agency in New York call us about how we can support their -- to fortify their subway system against future flooding and so on. So it's really not us deciding what SDGs we'd want to focus on. It's a type of work that we work -- that we're doing for our clients that sort of focuses that discussion. And then, of course, I'd be remiss if I didn't discuss -- didn't touch on the acquisition of Cardno that we announced last week. We see that, as the world and our clients continue to respond to climate change and environmental concerns, that like our Environmental Services' backlog grew to the mid-20% range all the way to the end of Q2 and expanding that -- our footprint of service offering is so important in order to continue to grow that revenue there. So the 1,100 people that are going to join us in the U.S. from an environmental services perspective from Cardno, it will add to our ES presence by about 60% and doubles it where we were from 5 years ago. And so while we already occupy a leadership position related to ecosystem restoration, Cardno also brings in a complementary offering through their native seed banks, and they have actually own a plant nursery that's really going to be a differentiator for us as we continue to grow in that area. And so with that, Michael, a very, very quick high-level overview, I'll turn things over to you for the Q&A session.

Okay. No, that's a great overview, Gord, just to get things going. Maybe before we dig further into some of the specifics of your sustainability- and ESG-related initiatives, you did touch on this in your prepared remarks, but Stantec's sustainability governance structure, can you talk a little bit more about how the various groups that are part of that structure work together? And then I believe you also have recently looked at establishing or have established a climate change and social value forum that's down at the country level. So if you can talk a little bit more about that, that would be helpful just before we kind of get into some of the specifics of the initiatives.

Yes. So in terms of the different groups that we have working together, we talked about our Board-level sustainability and Safety Committee, and then we've got our C-suite committee that Theresa actually chairs, and then finally down to the operations level, and so what we find is it's really a two-way dialogue, both sort of up the chain and down the chain. So as we've been working with Carrie Sabin in our various groups, we wanted to come out with these -- with a carbon-neutrality commitment. We wanted to come out with the net-zero commitment. And that was driven from discussions that we had at the Board level. And so we pass that down to the working levels to say what can we do? And when can we realistically achieve these time lines by? And so the groups that have been a bunch of work and came back and said, we can achieve carbon neutrality for the 2022 year. We can achieve, we believe, net zero by 2030. So we took that back up to the Board, presented that with the budget implications of doing so, certainly got their buying. And then with that, then we've kind of passed it back down the group. So it's really sort of this two-way ground up, but also top-down dialogue that we have. And it's a very open dialogue, in fact, at our Board meetings next week. Carrie Sabin, who is our VP of Sustainability, will come and talk to the Board about how we're achieving our objectives year-to-date, what we're thinking about for next year, how we're going to continue to evolve our sustainability plan that we publish every year as well. So really, really good dialogue there. And then a couple of other things that you talked about, one was our climate change initiative that we've rolled out. And really, what that was is we've had in each of our groups individually, whether it's water or environmental services or the energy transition group in our power group, all working on climate work in. And we just wanted to bring it all together and really get people to really fully understand all the offerings from the different groups to improve our ability to cross-sell and offer more services to our clients. So that's been a very, very strong initiative for us. We've rolled that out over the last couple of months. And in fact, even again in our Board meetings next week, Bob Seager, who leads our Environmental Services Group, is going to come and share sort of the outcome of that with the Board. So very, very strong. And then you had talked about our inclusivity and diversion councils from a global perspective. So we've always been very, very strong in North America with our employee resource groups. We have an I&D council at the country level. They're both Canada and the United States. And this year, we really rolled that out and formalized it from a global perspective. So you're right, each of our countries have an I&D council rolls up to our Global Lead, Cath Schefer, who is our Global Chief Operating Officer. But what we've done there, too, is the employee resource groups in each of those countries are fully integrated with our North American groups as well. And our employee resource groups, just for folks who might not be -- might be familiar with them, these are ground-level groups who are driven by people who self-identify as Pride@Stantec, Women@Stantec, Latinos@Stantec, Military Veterans@Stantec. And they self-identify as a group. They come together to discuss common concerns or common issues that they might have. And then these are run from a corporate perspective because we don't want them to be top-down driven, but they come up and they report up to us as to what sort of issues they have as an example as we're talking about how can we engage more with the Latino community. From a retention, from a recruitment perspective, we went to our Latinos@Stantec committee, which is primarily driven in the United States. And they came up with ideas for us to engage with the -- it's called the SHPE. It's the Society of Hispanic Professional Engineers and other groups like that in terms of starting that two-way dialogue to improve our exposure to those groups. So very, very -- so I think just from all those things, really, what we're trying to hopefully convey to you and the people who are participating that sustainability, this I&D, all of these things are -- it's not a board level commitment. It's not a ground level, but there is full engagement and commitment throughout the organization to these initiatives.

Okay. That's really helpful, Gord. And it makes a lot of sense. I guess if we go back to one of the things you mentioned in your opening remarks, just the percentage of Stantec's revenues that are aligned with UN Sustainable Development Goals, very impressive 49% of your 2020 gross revenues are aligned. And you mentioned that it's not ultimately Stantec that controls which UN SDGs you're aligned with or what percentage of the revenue is connected to those SDGs. I guess what I'm wondering, though, is can you speak to which of those UN SDGs seem to be growing the fastest. And so you don't control it, but where are you seeing growth and, in particular, SDGs? And then also, do you have a sense for based on those growth rates? Where this percentage of your gross revenues that is aligned where that could go to over the next several years?

Yes. No, no, great questions. Thank you. And so we're committed to continuing to grow our business on the water -- from a water perspective, environmental perspective, the energy transition and so on. And so as we continue to work with our clients to grow that group, there is a certain number of the UN SDGs that naturally aligns with. So for example, SDG-6 is related to clean water. So that would be all of our work in water and wastewater and sanitation. SDG-7, it relates to affordable and clean energy. So that would be our energy transition, solar, biomass, pump storage and so on. SDG-9 relates to industry innovation and infrastructure, certainly infrastructure being -- all of those things being something we're heavily involved with. SDG-11 is sustainable cities and communities. So that would be a lot to do with our urban places initiative. So the densification of the urban poors and so on. SDG-13 is climate action, 14 is life below water. But SDG-15, life on land is one that we're also very, very engaged in. And so those would be the ones that we find that the work that we do naturally aligns with. And in terms of where this could ultimately take us, that's hard to say. And so I wouldn't want to throw out a number at this point, but we will continue to evaluate on an annual basis. And we do believe that, that number will continue to evolve. But we do think there'll be other groups that comes out. SASB and these different EU taxonomies that are going to come out. And so where this all actually settles in the end with the standard remains to be seen. But certainly, we wanted to get out ahead of it, just like people know sort of where we fit in with the competitive set.

Okay. That's very helpful. We probably don't have time today to go through all of the various sustainability and ESG initiatives that Stantec's pursuing, simply because there are quite a few. But you did touch specifically on a number of them in your opening remarks. I'm wondering if we can dig a little bit further into a couple of these. So perhaps starting with your emissions target and the aim to achieve net zero by 2030, can you speak a little bit to the strategy for getting you there? What is it you are doing? And how do you see that unfolding?

Absolutely. So we see that the transition to net zero as being really a three-step process. So first, step one that we're working on now is to reduce our emissions as much as possible across really all of our scope. So there, we're looking at everything from reducing travel to rental cars and all the sort of things that [indiscernible] we typically do. And then secondly, as we move towards becoming carbon neutral for 2020, we're looking at for the emissions that we can't reduce. We're looking to purchase renewable energy certificates and certified carbon offsets to do that. And I think a couple of things are very important is that, for us, we're looking at certified carbon offsets. And there's a number of different ways. And so you can purchase these carbon offsets in different ways. Certainly, one way you can get them, the least expensive ones that you can find on the market. But what we're trying to do to the best degree that we can is to purchase these certified assets to offset emissions in country. So if we want to reduce emissions in the U.K., we're going to be looking for certified offsets in the U.K. If we're going to -- and so on. So I think that's a differentiator for something that we're trying to do versus what we've seen some of our others try to do it. It's a little bit more expensive, but we think it's sort of the right thing to do. And third, in order to achieve that net zero by 2030, we're looking to reduce that compensation that we're doing through purchase of offsets and sort of within additionality. So we're looking to how can we -- we're working with our innovation groups and our subject matter experts that find ways that we can produce new renewable energy sources and sequester carbon and these sorts of things in addition to what we've done to get us to carbon neutral. So it's a long ways to go, absolutely. And it's going to be hard work to get to carbon neutral by the end of -- for 2022. But I think achieving net zero, not just us, but the industry in general, there's a lot of heavy work to do between now and our commitment to 2030.

For sure. Certainly, ambiguous targets, but that makes a lot of sense. I guess just one follow-up on that. I mean, obviously, you only came out with these targets earlier this year. So we're -- it's still fairly early in the process, and you obviously are striving for carbon neutral in 2022. So I guess that's sort of the first milestone. But when investors look at your initiative to be net zero by 2030, how do you see sort of keeping the market price or the developments and the progress you're making? And are there any milestones along the path to that net zero in 2030 that we should be looking for over the next several years?

Yes. So in the short term, what we've done is it's actually in our executive scorecard to make this clear progress towards hitting our carbon neutral for 2022. And one of the things that we're looking to develop through 2022 is that sort of milestone check-ins along the way so that we don't go between 2022 and 2030 and say, "Don't worry, we're going to get there." So what can those check-ins be along the way? And I hope that we'll be in the position as we and the overall industry involves to talk more about that probably in 2022.

Okay. Fair enough. Maybe switching gears. I think it was on one of the slides that you ran through, but just something to pay on equity. Can you talk a little bit about the review that you undertook in 2020, including the findings and the action plan you're taking to move forward? I already noted the differential was not particularly great. So that's quite impressive and encouraging. But can you just talk a little bit more about those findings and then the plan going forward? And obviously, happy to have Theresa to get involved here as well at some point, if that makes sense.

Yes, completely. So you're right, we did a pay equity study in 2020. And when we focused on sort of the median compa-ratio from men and women in all of our different groups, and we found that we had about a 3% pay gap between men and women at that time. And so as you said, we were quite pleased with that. But what we've done is we wanted to be proactive and intentional about closing that gap. And so we've had a lot of discussions with our leaders as we're working through annual -- our annual pay raise process and so on. And so we've been very intentional about people, making sure that they're being aware of it. We would often say that men are more likely to come forward and say, "I want to raise than women are." So consider these things. And what we found, actually, even in the years leading up to 2020, but even since then and what we're seeing so far this year, is the average rate of pay increase for women at Stantec exceeds that of men. And then the -- on a percentage basis, the number of women being promoted at Stantec exceeds that of men. So I think this, not only we start from a good place with a 3% differential, but the intentionality and being proactive in the discussions is actually finding that the pay rate of women again is accelerating. So I think that we're going to be closing that gap even further this year and then subsequent.

Okay. I actually jumped ahead. I wanted to actually ask you maybe 1 or 2 other questions about your emissions targets. So if you don't mind going back to that subject just for a moment. That's okay. So I guess my -- one of the follow-ups I had for you on your emissions targets and the strategy there is your flexible workplace strategy, which I guess has come about as a result of the pandemic. And now there's some savings benefits to that for the company. But I'm wondering, is that helping you achieve your emissions reductions targets in any way?

Yes, absolutely. That's a key element in our emissions reduction strategy. And what we have pledged to do is reduced our real estate footprint by 30% from where it was at the start of 2021. So far, we're about -- we're at about 16% reduction by the end of Q2. So we're making really good progress on that. And the beauty of this flexible workplace strategy that we put in place is that it isn't just good for our ambitions, it's good for the bottom line. As you indicated, we expect a $0.10 per share uplift in 2021 from this initiative. But it's also really helpful from the perspective of employee engagement. I know we're not alone with employees that have determined that working from home is kind of a nice thing. And our employees, like everyone else, are expressing a desire to have more flexibility when things open up again on a more permanent basis. And so this strategy really achieves a number of objectives for us, including our emissions reduction target.

Okay. Perfect. Just the last question I had regarding the emissions reduction targets and the strategy there. Looking through your most recent sustainability report, there's a part to it that includes an ESG materiality matrix, which I thought was interesting. And there's a lot of good information, I think, that one can take from that matrix. I guess the one thing that I was a little bit curious about, I noticed that the emissions is one of the topics under the environmental category in that matrix. And it seems to be under a category that you call manage as opposed to an operational priority, yet there seems to be a lot of focus on emissions. So I was a little bit curious about the placement of that under that managed category versus operational priority. And perhaps I'm just sort of misunderstanding a little bit the -- what we should be taking from that matrix. But I'd like if you clarify, if possible.

Yes, I can certainly address that. So the materiality matrix is really designed to help us focus our efforts and priorities. And certainly, as we've been talking about emissions reduction from an operational perspective is very, very important to us. But the reality is that we are a professional services company. So we don't generate a lot of emissions in the first place relative to other companies that might be manufacturers or have a heavy footprint around transport and that sort of thing. So from that perspective, that's why it falls into that operational -- into that managed category is that we're doing everything we can to manage. But from a priority standpoint, we can make a much bigger impact through the work that we do with our clients in helping them to reduce their emissions. And that's why the materiality matrix falls out the way that it does.

Okay. That makes sense. Can you talk a little bit about the extent to which management compensation at Stantec is linked to the achievement of your various ESG targets and how that looks?

Yes, absolutely. And so there are a number of components of -- in our annual scorecard that are tied directly to E, S and G. So as an example, achieving our carbon commitments for -- carbon neutral for 2020 is directly on their own. As we spoke about, we'll transition once we hit that goal to having something on the scorecard related to our net-zero commitment. Inclusion and diversity is on our scorecard as well in terms of ensuring that we're continuing to drive that forward in addition to employee engagement. Employee retention is on there, of course, referencing to the health of our overall organization. And as we've talked about before, our employee retention, our voluntary turnover rates are always 2% to 3% below industry average and continue to be so through the pandemic and as we come out. We have HSSE commitments there in terms of TRIR rates and so on. So very, very strong there. And then from a governance perspective, we also have quality metrics related to project reviews to maintain our ongoing ISO Certification. So we hit on both -- on all of the E, the S and the G in our executive compensation scorecard.

Okay. Thank you for that, Gord. We spoke earlier about the dialogue that occurs within your organization at all levels to establish targets and come up with a strategy to meet those objectives and targets. I guess I'm wondering if you can talk a little bit about how you engage with your various stakeholders, whether these be investors or clients, perhaps communities that you do work in to better understand what they'd like to see from Stantec and how those engagements and discussions inform some of the strategies and targets that you come up with.

Yes, absolutely. So maybe starting with BR employees. And we're always engaging with our employees through our strategic planning process, through town halls that we have with them, through individual conversations. And many of them just directly reach out to either Theresa or I or others on our C-suite to talk about these topics. So that would be related to the environment and the type of work that we're doing. And certainly, I get a lot of questions on the social side with regards to I&D and what more we can do to make a lasting long-term difference there. But we also engage with our clients. It's part of our formal client review process, where we're talking to them, not just about the things that we're doing in the community, whether it's getting -- engaging to improve the social fabric of the community through volunteerism or supporting food banks and homeless and shelters and things, but also how can we help them achieve their longer-term ESG goals. So if we're talking about a new public library, certainly, let's talk about lead certifications, let's talk about wellness, let's talk about natural light, let's talk about net zero, these sorts -- we're always having these sorts of dialogues with them. And then certainly, shareholders. We've -- what I found it's been interesting that, over the last 5 to 8 years as I would travel through Europe and meet with our various shareholders there, a lot of discussion about ESG certainly focus on water there over the last 5 to 8 years, not so much in North America. But we've really seen over the last couple of years that the North American investors have gotten much more interested in what we're doing, how we can contribute to ESG there. So we're always getting those discussions now from the shareholder community where we really weren't 2 or 3 years ago. And I think the level of interest from shareholders has certainly increased and really is evidenced by the fact that we're having this discussion today with our shareholders where we wouldn't have 5 years ago.

No, fair enough. That's a great point. We did not -- yes, this is a fairly early new thing to be having, forms of this nature in the last several years here in North America, I think. So maybe just following up on that. When you do have discussions with your investors and your shareholders, what are some of the initiatives and targets that you put out that they are most focused on? I mean there are -- you do have a number, and they're all very important for different reasons. But are there some that seem to be a focus for your investors?

Yes. So we often get asked about the overall health of our organization. So employee engagement, employee retention certainly as a requirement to continue to grow and meet the sort of impending wave of additional infrastructure work that's coming on, will you be able to service that. And how can you do that through your existing staff and the health of that. And of course, they were very, very strong because of the -- our low voluntary turnover rates compared to overall industry. We also get asked about how the work that we do can support and strengthen the overall communities that we're doing work in from a social equality perspective? And that's -- we do a lot of work in there. We actually have a lady who's with us, who is our Director of sort of equity and project participation. And that's something that we wouldn't have had 5 years ago either, but we're getting a lot of our clients are asking about that. If you're going to put in a large infrastructure -- an example of some work that we're doing right now in the Western U.S. city where we're putting in a subway, and the subway has a number of stops in different communities. And around the subway stop, there'll be a lot of work for several years. How can we then increase the participation of underrepresented businesses in the area? So everything from catering trucks that come to do that, how can we employ at-risk youth to work with us on security, get them trained up to do project inspections and so on and then make -- by both of those make a long-term lasting impact on the community? So those are the sorts of things that we often get asked. Certainly, we get asked about the more obvious ones are carbon commitments and so on. But I think more and more, we're seeing people say, yes, you've got a carbon-neutral commitment. You've got a net-zero commitment, that's good, and we expect that you'll achieve those. But now how can you help other things? And that's what we're talking about. Our contributions to I&D in our company, how can we help the communities that we serve? And then from -- certainly from a governance perspective, how can we ensure that these things are actually occurring?

Okay. So that's great information. Thank you. I'm curious to know when -- yes, Stantec has already achieved quite a bit with respect to your sustainability rankings and tremendous accolades, earlier this year ranked Fifth Most Sustainable Company in the World by Corporate Knights and, I believe, first in North America. So incredibly impressive, strong credentials and some ambitious targets. I'm wondering how all of that is interpreted by your clients and the extent to which all of that is important as part of the decision-making process to award Stantec contracts and work? Are these -- these achievements and accolades, do they make a difference as far as your ability to win [indiscernible] work?

It's interesting, they very much do, Michael. And so it's interesting that this is the type of work that we've been doing for quite some time. And we've, for a long time, been helping our clients as they're starting to think about their carbon targets, their ESG targets. But now with these accolades that we've got there, we have even more clients reaching out to us to ask how we can help them achieve their objectives. And some of the things that we spoke about just a moment ago about how can we improve the social fabric of your business through the subway project that we're running through, they have even thought of that. And so it's just a lot of what we do is now able to help our clients. They're now hiring that person, I mentioned that Director of Project Equity, and so they're hiring us paying for her to work on their projects, to help them sort of work through the overall chain. So those things are being -- are very, very strong, and it actually is a new line really of work that, while we've already been -- always supported our clients in it, it's not really a formal piece of work that we do in. And so sort of that virtuous circle. You do the work, you get the accolades, you get more client [indiscernible] so you do more work, you get more accolades, sort of that virtuous positive cycle that we're investing right now.

Okay. That makes a lot of sense. I wanted to ask you about your Energy & Resources business. So if we go back a number of years, this was a significant portion of your revenue, if I recall correctly, something on the order of about 30% sort of in the pre-2014 period. And not all of that was oil and gas, but a significant portion of it was and also mining-related work. I know that part of the business has come down in terms of its relevance as a percentage of the total over time. I'm just wondering where you see that going over the next several years and how that fits into your thinking related to focusing on sustainability and some of the more environmental-related ESG initiatives?

So absolutely. So you're right, pre-2014, our oil and gas group would have been almost 35% of our net revenue generation at the company. And now that group is 8-point-something percent. And so in our 2019 strategic plan, we had made the statement as well that we wanted to see our exposure to the commodities-driven markets, oil and gas, mining and so on, to be less than 15%, 1-5 percent, of our overall net revenue generation. And we certainly are well within that band now. So the type of work that we do, for example, to support our oil and gas clients is, first of all, to say that we are a -- our oil and gas work is primarily a midstream pipeline in it. So we're doing a lot of environmental work there where we're looking for route selection. We're doing environmental monitoring during construction. We're engaging with the communities and particularly, First Nations communities along the way to gain and include community participation and leave that longer-term lasting benefit. Also, though, it's interested that the type of work that we're doing as we support our mining clients is increasingly moving towards things like selenium treatment at coal mine plants. So we're removing the toxicity from the mine affluent. When we talked, even last week, about Cardno and some of the work that they do in the mining space is they have a particular specialty in mine closure. So a lot of the work that we're doing, while it is for oil and gas and mining clients, again, much less than we were previously, it's to sort of reduce the environmental footprint of the work that these companies do and to assist in closure activities and that sort of thing. So that's sort of how we see that transitioning over now and through the next several years.

Okay. Wanted to ask you about acquisitions and the linkage between your pursuit of certain acquisitions and your sustainability and ESG initiatives. So specifically, obviously, acquisitions are a core part of Stantec's strategy. You recently, just last week, announced a significant transaction, which you mentioned earlier, the Cardno asset that you're acquiring. I guess the question is when you look at acquisitions, to what extent do you take ESG considerations into account? And how do you factor those considerations into your acquisition analysis?

So with all of our M&A activity, the very, very first thing that we look for is cultural fit. And so as you think about the social governance sort of group, the S and the G in particular, we're looking for firms that have an engaged workforce, that are mature from an I&D perspective, that are really considering these sorts of activities. And so as we acquire a firm, like Cardno is a perfect example, they meet our -- they have similar community investment. They have similar philosophies in terms of employee resource groups and so on. And so that's extremely important for us. Great, great, strong governance. But then the type of companies that we're looking to grow into also typically will support our continued growth and in the environmental space. We're looking for, as Cardno have, a strong environmental presence to grow our revenue generation there. We're looking at certainly firms related to the water space to continue to grow in there. We're looking at firms in the building space, where we can look at increasing our net zero and all these sorts of targets as well. So the firms that we're looking to deploy capital are that water, transportation, public transit, environmental building type firm. We stated that we don't see ourselves deploying capital over the next couple of years, really, to further increase our growth in the oil and gas space and so on. So I think as we look at growing that revenue, we're considering the type of work these companies do. From a cultural perspective, we're considering how they'll support our social and our governance growth as well.

Okay. Clearly, it sounds as though you've been taking into account some of these considerations all along. So for example, cultural fit, that's always been important for Stantec, for example. I'm wondering if you've noticed a change in the targets that you look at or that are out there, in terms of how they're approaching sustainability and ESG-related initiatives and thinking about -- so Cardno, those -- that was a public company or is a public company. But some of the acquisition targets you're looking at are private companies. And so perhaps not as much in spotlight as a public company would be. I'm just wondering to what extent they are looking at some of these things as seriously as you are and some of your peers are, if you've noticed a change over time in their focus in this area of sustainability and ESG.

We actually have seen a change even on the private firms, particularly on the ones that are a little bit larger in size. Some of the smaller firms, I think, are still working through what does it mean to them that, certainly, the type of companies that we're buying, like we mentioned, Paleo Solutions some time ago, their -- all their work is 100% driven by environmental work. They're archaeologist and paleontologist and so on. It was a company that was run by a lady. But I think that she never thought about we should create our employee resource group for women at Paleo, because it was a small firm of 65 people. And actually the type of the gender diversity of a company like that is actually hugely in favor of women just because of the type of work that they do. But as we look at larger firms in the several hundreds and thousand-person range, even on the private side, ESG is something that they're more and more interested in. Many of them have developed programs. Others that we talk to are looking to build upon our program should a transaction be successful.

Okay. Maybe just one last follow-up on all of this. Perhaps part of the opportunity set that's available to Stantec from an acquisition perspective is obviously, in part, a function of the competitive environment and the landscape, others pursuing acquisitions as well. But as some of these firms that you are looking at have may begin to take sustainability and ESG more seriously, for lack of a better term, has that expanded the sort of the opportunity set or the pipeline? There may have been a firm that you once looked at or would have looked at but didn't check all the boxes, but now some of these things are taking on greater importance and maybe they do check those boxes. Is that a thing?

Yes. It is. I also think that what's interesting is that it's making some firms that had perhaps thought about, "Well, why don't we go a private equity group?" Starting to think, well, maybe we should line up with a strategic like a Stantec, a strategic buyer like Stantec. And one of the reasons would be like if you're a firm and you really -- and you transact, you sell to private equity, you're basically going to do the same thing tomorrow that you did today. There's not a lot that, that private equity firm is going to bring to you. In fact, they might even be thinking that you will be the platform for further growth. But some of the firms that we've been talking to lately have said, "We see the world is changing, and we want to be part of that change." And that's a benefit of coming to someone like Stantec with a strong ESG DNA. It's something that's actually been attractive to some of the firms that we've been talking to recently.

Okay. No, perfect. That's very interesting. We've been chatting for a while. I think we've covered a fair bit of ground. I'm just going to remind the attendees that are listening in today and watching, certainly, if you do have any questions or any questions, please feel free to use the chat feature. I'd be happy to ask it on your behalf anonymously. We have about sort of just under -- or just over 10 minutes left, and I do have a few other questions for you, but I want to remind the attendees of that option. So I'm not seeing anything yet, but happy to take any that come in. But I guess what I'd maybe move on to next is a question, and perhaps this is best directed to you, Theresa. We've seen some companies entered into a sustainability-linked financing facilities. So I'm wondering if this is something that Stantec has considered or would consider? And your thoughts on that?

Yes. I mean it's a really great question. And for us, the short answer is absolutely is something we are beyond considering, we're actually working on because it's a very strong belief of mine and of the broader organization that connecting our corporate finance strategy to our ESG performance is an opportunity for us. And so we are working on developing a sustainability-linked loan. It's primarily focused on 2 metrics, one that is emissions based, and one that has a social element to it. So stay tuned. We'll be talking about that a little bit more in the near future.

Perfect. And I'm sure we could devote an entire discussion of this nature to that particular topic in the market and how it's evolved. But any sort of high-level thoughts on the options for sustainability-linked financing today versus several years ago, to the extent that you were looking at them then?

Well, I think several years ago, it really wouldn't have been on the radar screens of many. And so the opportunity is really vast. And I think what is great about this particular period of time that we're in is, as more and more organizations look to create their SLLs, we're not yet in a space where you end up being pigeonholed as to here's the particular metrics that you must follow because everybody else is doing it. And we -- that's what we found, that we had the opportunity to create bespoke metrics that weren't just because that's what everybody else is doing, they're metrics that matter to us and that are relevant to our business and resonate through our whole organization. And so that, I think, is the nice place that we are today. And so when I talked about our 2 metrics, emissions reduction is very common. But for us, when we looked at what other metrics might be appropriate or relevant, this notion of selecting a metric that relates to our social targets, actually you'll find that there isn't anyone else yet that has a target like what we're creating. So that's pretty exciting for us.

Okay. We'll stay tuned. I look forward to hearing more about that. While we're talking, Theresa, I guess one other question for you. And the question is about whether you can talk about your involvement with the UN Global Compact CFO Taskforce for the SDGs, which you are a part of. And I guess, maybe making a linkage back to the last question, I don't know if this is relevant at all, but with sustainability-linked loan, is that something that Taskforce is also working on?

Yes, very much so. So just to step back for a second. The CFO Taskforce, it's a group of about 60 CFOs from around the world, represents more than $1.7 trillion in market cap of companies that are all signatories to the UN Global Compact. And the Taskforce is focused on creating that stronger link between corporate investment and sustainability and to mobilize investment dollars, to support the SDGs in areas like sustainable infrastructure, renewable energy, water health. So even from that description, you can hear how well that ties into Stantec's service offerings and our expertise. And so the CFOs in the Taskforce are committing to make pretty material investments over the next 5 years towards the SDGs and to link close to half of all of our corporate financing to sustainability performance through the issuance of new sustainable finance instruments, as we've been talking about. So I've been on the Taskforce for the last couple of years. I think their goals are very important to achieve. And so when we talk about our SLL, we talk about our recent announcement on Cardno and deploying capital to affirm that really strengthens our environmental services offerings, these are all really great examples of the kinds of actions that the CFO Taskforce is promoting.

Great. Thank you for that. Wanted to ask you a little bit about innovation. So this is -- as I understand, is a very important aspect of Stantec's overall strategy. I'm wondering if you can talk a little bit about how important, from your perspective, innovation is to your strategy? And you have something called the Innovation Office or Stantec's Innovation Office. I'm wondering if you can talk a little bit about that, whether there are any linkages to your focus on innovation, that innovation office and some of the things you're doing with respect to sustainability?

Certainly. So we did, in the December of 2019, when we rolled out our new strategic plan. One of the keys there, one of the key pillars that we had was innovation. And we've had a creativity and innovation fund for well over a decade. But what we wanted to do is formalize it, our Innovation Office. And so we set that up. We named a Chief Innovation Officer, who sits on our C-suite. And we set out about to formalize innovation throughout the organization. And so we have a number of different programs, very, very strong for employee engagement. We have our annual Innovation Summit that we had just back here in September. And what that -- to qualify for that, people from around the world submit ideas that they're working on, things that can be innovative from the perspective of how we can support our clients in climate solutions, how we can increase employee engagements. So there was 4 main tracks. And from that, we shortlisted to about 40 people, and we had each give like a 15 minute-set of a TED talk type of -- so we've just done that interestingly, we have roughly 22,000 employees. We webcast these. We recorded them and webcast them. And we had almost 10,000 unique hits on our people who -- so almost half our company, some time or another, through there, dialed in to see what our -- what these folks are up to. So very, very strong there. But a lot of the ideas that come out of it are things that we're using to support our clients as they achieve their climate change initiatives, their ESG initiatives, but also Stantec. And so it is very, very -- not only do we see it as a competitive advantage because we've looked at it from a couple perspective, what can we do internally to improve our operations. Second stream is what can we do externally to support our clients. So we see it as a competitive advantage, strong from an employee engagement perspective, but also sort of supports our longer-term ESG goals.

Okay. That's helpful color. Perhaps somewhat related to that, but also maybe a little bit different. You made an announcement earlier this year about a partnership with a group called -- or a firm called BlueSky Resources, and this was aimed at providing real-time tracking of air pollutants and GHG emissions. I'm just wondering -- I mean, perhaps you can comment a little bit just on that particular announcement. But more broadly, should we be looking for Stantec to be looking at additional partnerships or alliances of this nature going forward?

Sure. And so yes, BlueSky was a -- is a start-up. And as part of a start-up accelerator program that we have, we wanted to engage with them just to provide some support to help them get to the next level. And so exactly, BlueSky uses a variety of remote sensing tools to determine GHG and other component emissions from affluent or from -- everything from non-point source pollutions to point sources like manufacturing facilities, landfills and so on. And then so what we're able to do is working with some of these large clients that we are beginning to engage with we can provide them a dashboard, where they can see how their emissions are trending over time, where they might be in compliance with regulatory or their own internal [ boards ]. And then the beauty of it is not only do we have that line of board, but then if there are any things that are out of compliance, we can then roll it over to our groups who can help them get back into compliance. So it's sort of a two-pronged approach there. And so we are looking for other opportunities where we could invest with firms that might support our autonomous vehicle programs or support our overall climate change initiatives from other perspectives. And so that's something that, as we find firms that meet our -- not just our investment criteria but our long-term where we want to take a company perspective, I think you would see other announcements of us taking a stake in supporting these from an acceleration perspective.

Okay. That's interesting. So we are almost at top of the hour. I think we've covered a lot of ground. I will -- I think we'll probably wrap it up there. But what I'll do is turn it back to you, Gord and Theresa, for any final remarks or thoughts before we close it out.

Well, I just wanted really to thank you, Michael and everyone, to -- for taking some time to meet with us today to talk about this topic. It is something that -- as we've said, it's something that we've done for decades and sort of in our DNA. And we're just glad that more and more of our employees, of our clients and certainly the investment communities is taking more of an interest in it as well. And it will continue to push us and our industry overall forward. So I think it's very, very positive. And just thanks again for the opportunity.

Well, thank you for joining us and for sharing all the information you did. And again, I think it came up at various points in the presentation, but -- and in the discussion, but Stantec truly does appear to be a leader in this area and again, tremendous accolades. So congratulations on all of that and the credentials. And certainly, we look forward to following the progress in the years ahead.

Thanks again.

Thank you.

Grateful. Thank you, everyone. Thank you.