Northwest & Ethical Investments L.P. and NEI Global Impact Bond Fund

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from subsection 2.1(1) of National Instrument 81-102 -- Investment Funds to permit funds to invest more than 10 percent of net assets in debt securities issued, or guaranteed fully as to principal and interest, by foreign governments or supranational agencies -- subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.1(1) and 19.1.

August 7, 2025

IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
(the Jurisdiction)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
NORTHWEST & ETHICAL INVESTMENTS L.P.
(the Filer)

AND

NEI GLOBAL IMPACT BOND FUND
(the Current Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Current Fund and any existing or future investment funds subject to National Instrument 81-102 Investment Funds (NI 81-102) that are or will be managed by the Filer or an affiliate of the Filer (the Future Funds and together with the Current Fund, the Funds) for a decision under the securities legislation of the principal regulator (the Legislation) that grants relief from subsection 2.1(1) of NI 81-102 to permit the Funds to invest up to:

(a) 20% of a Fund's net asset value at the time of the purchase in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments, other than the government of Canada, the government of a jurisdiction in Canada or the government of the United States of America, and are rated "AA" by S&P Global Ratings Canada (S&P) or its "DRO affiliate" (as defined in NI 81-102), or have an equivalent rating by one or more other "designated rating organizations" (as defined in NI 81-102) or their DRO affiliates; and

(b) 35% of a Fund's net asset value at the time of the purchase in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments, other than the government of Canada, the government of a jurisdiction in Canada or the government of the United States of America, and are rated "AAA" by S&P or its DRO affiliate, or have an equivalent rating by one or more other designated rating organizations or their DRO affiliates

(such evidences of indebtedness are collectively referred to as Foreign Government Securities).

(collectively, paragraphs (a) and (b) above, the Exemption Sought)

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission (the OSC) has been selected as the principal regulator (the Principal Regulator) for the application; and,

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is to be relied upon by the Funds in each of the other provinces and territories of Canada (together with Ontario, the Jurisdictions).

Interpretation

Unless otherwise defined, terms in this decision have the respective meanings given to them in NI 81-102, National Instrument 14-101 Definitions, and MI 11-102.

Representations

The decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is a limited partnership formed under the laws of Ontario which acts through its general partner, Northwest & Ethical Investments Inc., a corporation formed under the laws of Canada, with its head office in Toronto, Ontario.

2. The Filer is registered as (i) a commodity trading manager in Ontario; (ii) a portfolio manager in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan; (iii) an exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan; and (iv) an investment fund manager in British Columbia, Newfoundland and Labrador, Ontario and Québec.

3. The Filer, or an affiliate of the Filer, is, or will be, the manager, portfolio manager and/or trustee of each of the Funds.

4. Neither the Filer nor the Current Fund is in default of securities legislation in any of the Jurisdictions.

The Funds Generally

5. Each Fund is, or will be, established under the laws of Ontario or Canada as a mutual fund that is a trust or a class of shares of a mutual fund corporation and is, or will be, a reporting issuer in one or more of the Jurisdictions.

6. The Funds are, or will be, governed by the provisions of NI 81-102, subject to any exemption therefrom that has been, or may be, granted by the applicable securities regulatory authorities. Securityholders will have the right to vote at a meeting of securityholders in respect of matters prescribed by NI 81-102.

7. The securities of the Funds are, or will be, qualified for distribution in one or more of the Jurisdictions pursuant to a simplified prospectus and fund facts documents prepared and filed in accordance with the securities legislation of such Jurisdictions.

The Current Fund

8. The investment objective of the Current Fund is to provide current income and long-term total returns by investing in debt instruments issued by companies, governments, and organizations located all over the globe whose products, services, or funding objectives help address some of the world's major social and environmental challenges.

9. To achieve its investment objective, the Current Fund invests primarily in investment-grade fixed income instruments throughout the globe (including developed and emerging markets), across a range of sectors that are addressing some of the world's major social and environmental challenges, and that meet the portfolio sub-advisor's proprietary impact criteria. The Current Fund's average credit quality is expected to be investment-grade, but the Fund may invest up to 20% in below investment-grade-rated securities in order to take advantage of market opportunities based on the portfolio sub-advisor's research.

10. As part of its investment strategies, the Current Fund would like to invest a portion of its assets in Foreign Government Securities.

The Future Funds

11. The Future Funds will similarly have investment objectives and strategies that permit them to invest a majority of their net assets in fixed income securities, including Foreign Government Securities.

Reasons for Relief

12. Subsection 2.1(1) of NI 81-102 prohibits the Funds from purchasing a security of an issuer, other than a "government security" as defined in 81-102, if immediately after the purchase, more than 10% of the net asset value of a Fund would be invested in securities of that issuer.

13. The Foreign Government Securities do not meet the definition of "government securities" as such term is defined in NI 81-102.

14. The Filer believes that the ability to purchase Foreign Government Securities in excess of the limit set by subsection 2.1(1) of NI 81-102 will better enable a Fund to achieve its fundamental investment objectives, thereby benefiting a Fund's investors.

15. The Exemption Sought will enable a Fund to (a) preserve capital in foreign markets during adverse market conditions; (b) increase its exposure to Foreign Government Securities that offer potentially higher yields than Canadian or US short-term securities; (c) increase its exposure to Foreign Government Securities that are undervalued and may be expected to generate capital growth over the long term; (d) have access to assets with less credit risk; (e) better manage its interest rate, duration and credit risk; and (f) enhance its portfolio diversification.

16. Each Fund will only purchase Foreign Government Securities if the purchase is consistent with its fundamental investment objectives.

17. The simplified prospectus of the Funds will disclose the risks associated with concentration of the net assets of the Fund in securities of a limited number of issuers.

Decision

The Principal Regulator is satisfied that the decision meets the test set out in the Legislation for the Principal Regulator to make the decision.

The decision of the Principal Regulator under the Legislation is that the Exemption Sought is granted provided that:

1. Paragraphs (a) and (b) of the Exemption Sought will not be combined for any one issuer;

2. Any Foreign Government Security purchased by a Fund pursuant to this decision is traded on a mature and liquid market;

3. Each Fund has, or will have, investment objectives and strategies that permit it to invest a majority of its net assets in fixed income securities, including Foreign Government Securities;

4. The simplified prospectus of each Fund discloses, or will disclose in its next amendment or renewal following the date of this decision, the additional risks associated with the concentration of the Fund's net asset value in securities of fewer issuers, such as the potential additional exposure to the risk of default of the issuer in which the Fund has so invested and the risks, including foreign exchange risks, of investing in the country in which the issuer is located; and

5. The simplified prospectus of each Fund discloses in the investment strategies section, or will disclose in its next amendment or renewal following the date of this decision, a summary of the nature and terms of the Exemption Sought, along with the conditions imposed and the type of securities covered by this decision.

"Darren McKall"
Associate Vice President, Investment Management Division
Ontario Securities Commission

Application File #: 2025/0368
SEDAR+ File #: 6298646