Canadian small-cap equities case study
ESG in action




Key Points

Analyzed carbon emissions disclosure despite the lack of disclosure in the small-cap space, including probing and engaging with company management of higher-carbon industries.
Reviewed worker safety for industrial portfolio companies like Badger Infrastructure and Blackline Safety.
Engaged with the board of McCoy and mdf commerce for greater shareholder representation.


As part of Burgundy’s carbon emissions research, we spent time analyzing the rate of emissions disclosure in our portfolio. Sadly, we found that only four of our holdings disclose carbon emissions.
Of these, only two, Equitable (bank) and ATS Automation Tooling System (automation equipment supplier), are in low-carbon industries. The four that disclosed carbon were larger capitalization companies, suggesting smaller businesses may not have the managerial resources for carbon reporting yet.
Of the four companies with disclosure, Enerflex, an operator of emissions-intensive gas compressors, was the emissions outlier. After probing the management team, we learned that Enerflex is acutely aware of this issue and is making plans to electrify its compressor fleet over time to reduce emissions. Enerflex is also engaged in carbon capture and store projects, where its compressors are used to remove carbon from the atmosphere (this is still a modest business today).
enerflex's carbon disclosure
Enerflex's compressors are used to remove carbon from the atmosphere.
One company we engaged with for better disclosure was K-Bro Linen. K-Bro is an outsourced laundry operator that provides clean linens to hospitals and hotels and uses natural gas to power its washing and drying facilities. In our last management meeting, we asked K-Bro’s team for information on the carbon footprint of its facilities. They provided some useful information which assured us that the company’s footprint was not a major risk factor and said they are working on improving shareholder disclosure.


Within social factors, worker safety was an area of focus this year. We reviewed our industrial holdings’ information circulars in search of evidence of a safety culture at the management and board levels. Two of our six industrial holdings, Badger Infrastructure and Mullen Group, have a component of executive compensation tied directly to observable safety indicators.
Badger and Mullen both use recordable injury frequency as a driver of executive compensation as well as a mixture of other safety key performance indicators (KPIs). While Mullen does not disclose the magnitude, a meaningful 25% of executive bonuses at Badger are tied to safety. We were pleased to see this alignment between executives and workers at Badger and Mullen.
The other industrial holdings have board oversight functions that involve health and safety, but nothing as direct as Badger and Mullen. This is disappointing, although for some it may simply be because the workplace is less dangerous. For instance, Calian, another portfolio holding, is classified as an industrial but is largely a consulting and staffing business in healthcare, IT, and military training.
Workplace Safety
for safety
At Badger, 25% of executive bonuses are tied to safety.
One company we think is benefitting from the rising focus on worker safety is Blackline Safety. Blackline provides connected gas detection devices to lone workers operating in hazardous environments like refineries and gas utilities. While we are not impact investors, we like the fact that Blackline is aligned with the broad societal push for safer working environments.


This year, we tried to engage with boards when we thought more shareholder representation was appropriate. In the summer of 2021, we suggested a director for McCoy’s board because we felt the low valuation of the business warranted an exploration of strategic alternatives.
McCoy is an energy service business that suffered a significant drop in demand as drilling activity declined over time, culminating in the record low rig count through COVID-19. This pressure left McCoy trading at a fraction of its working capital. As a result of the new director’s influence, McCoy announced it had hired a financial advisor in November to explore strategic alternatives.
More recently, we engaged with software business mdf commerce by suggesting two ex-technology executives as directors. We know one of these director candidates from our investment in VitalHub, where he leads the board’s capital allocation committee. As mdf commerce focuses on organic growth and acquisitions, the company has been undergoing a board refresh, creating an opportunity for us to propose directors.
Sources: Bloomberg, company filings, Burgundy research

About the Author

Andrew Iu
Andrew Iu, CFA
Vice President,
Portfolio Manager,
Director of Research
Having invested in small-cap stocks for years in his personal portfolio, Andrew converted a hobby into a career by joining the Canadian small-cap team at Burgundy. Almost a decade later, the depth and inefficiencies of the small-cap market continue to captivate Andrew. Beyond analyzing small-cap stocks, Andrew builds and develops Burgundy’s analyst team in his role as Director of Research. He enjoys working closely with the team and feels that setting analysts up for success is one of the most rewarding parts of his role.
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