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Agenda
1. What is responsible investment (RI)?
2. ESG issues
3. Summary of RI market trends
4. RI and performance
5. Learn more
1. What is Responsible Investing?
What is Responsible Investing?
• Responsible investment (RI) is the integration of environmental, social and governance factors (ESG) into the investment decision-making process.
• In recent years, responsible investment has come to encompass:
• These are all components of RI and have played a part in its history & evolution.
Evolution of Responsible Investment
Responsible Investment Strategies
Negative or positive screening ESG integration Engagement / shareholder action Impact investing Sustainability themed investing
Negative or Positive Screening
• Negative screening• Exclusion (from a fund or portfolio) of certain sectors,
companies or projects based on ESG criteria • e.g. divestment from certain industries
• Positive screening • Inclusion of certain sectors, companies or projects
based on positive ESG performance relative to industry peers
• e.g. impact investing, best of sector
ESG Integration
Explicitly embedding environmental, social and governance issues into traditional financial analysis.
Integration is different from screening in that integration combines ESG data, research and analysis together with traditional financial analytics in company valuation.
Unlike screening, companies are not ‘screened in’ or ‘screened out’ of an investible universe.
Integration must be verifiable by a transparent and systematic process informed by ESG research & analysis.
Corporate EngagementUsing shareholder power to influence corporate behaviour directly. Examples:
Engaging in dialogue with company management or boards of directors.
Filing or co-filing shareholder resolutions Voting proxies based on ESG criteria
Impact InvestingTargeted investments, typically made in private markets, with the explicit purpose of solving social /environmental problems.• Impact investing includes:
• community investing• financing for green business, social entrepreneurs,
and other companies with clear ESG objectives• enterprising (i.e. revenue-generating) non-profits.
Sustainability Themed Investing
Investments in themes or assets specifically related to sustainability, such as:
• energy efficiency• clean energy• green infrastructure• adaptive solutions
RI Investment VehiclesResponsible investments using the strategies we’ve discussed are available through a wide range of investment vehicles, including:
RI Asset Classes• Responsible investments are found in all major asset
classes:
2. ESG Issues
Climate Change
Water Scarcity
Photo: Oil sands mine along the Athabasca River near Fort McMurray, AB. Credit: Jeff McIntosh / THE CANADIAN PRESS
Supply Chain
Rana Plaza Factory, Savar, Bangladesh. April 24, 2013
Board Diversity
Aboriginal and Community Relations
Photo: Cenovus.com
• Free, prior and informed consent (FPIC)
Say on Pay
3. RI Market Trends
RI Market Growth
RI Market Growth
RI Market GrowthWhat explains this growth?
1. Growth of RI pension funds – Grew by $289 billion in 2 years – Now at $821 billion, 81% of Canadian RI AUM
2. New entrants– 41 investment mgmt firms with RI AUM, up from 24 at 12/31/2011– 29 investment mgr PRI Signatories, up from 12 at 12/31/2011
3. Qualitative factors & market shifts– Personal values– Greater awareness of ESG risks – Generational transfer of wealth to “millennials”
Retail RI
Retail assets now over $60 billion! The pie chart shows the breakdown of retail assets, in millions CAD.
Retail RI Mutual Funds
RI Strategies
Note: many investors/asset managers use multiple RI strategies, so these numbers sum to a total that is greater than the RI industry total of $1.01 trillion.
4. RI and Performance
Jantzi Social Index
MSCI World SRI Index
Canadian RI Funds
Canadian RI funds vs industry averages. To Dec. 31st, 2015. Data courtesy of Fundata.
Canadian RI Funds
Canadian RI funds vs industry averages. To Dec. 31st, 2015. Data courtesy of Fundata.
Investor Interest
• In 2014, an NEI survey found that 92% of Canadians say it is important to choose investments that align with their values.
• Yet 52% of Canadians are not familiar with RI.
• Ask us about responsible investment! Email: [email protected]
5. Learn More• RIA Website
Visit the RIA website to learn more about responsible investment: www.riacanada.ca
• RIA Guide to Responsible InvestmentView the RIA Guide to Responsible Investment to learn more about the options that are available to responsible investors in Canada: www.riacanada.ca/Guide-to-RI
• Future Values WebsiteVisit our Future Values website to integrate responsible investment into your comprehensive financial plan: www.futurevalues.com
