For Sucheta Rajagopal, a certified financial planner and portfolio manager with Toronto-based Mackie Research Capital Corp., it’s not difficult to find clients who want their investments to reflect their values and make a reasonable return. She has been at the forefront of socially responsible investing in Canada for decades.
The hard work is figuring out which companies truly fit the bill. They’re out there, but she says it requires effort to cut through the PR and find companies that are making real progress on environmental and social justice issues.
Rajagopal immerses herself in information. She attends a lot of events. She’s on a myriad of mailing lists and she spends countless hours researching companies online. “Much of what I do is just sifting through vast amounts of information and then figuring out what’s greenwashing,” she says. “Who’s just talking about [making positive environmental or social changes], and who’s walking the talk? And which companies are really doing something?”
A snazzy corporate website brimming with images of nature isn’t enough to show that companies are serious about the environment. What interests Rajagopal are numerical targets and concrete dates.
“When a company says, ‘We are reducing our greenhouse-gas emissions by this amount by this date,’ that’s something you can hold them to,” she explains. “If someone said they were going to do something by May, 2016, you can look at what they actually did.”
Social engagement has been Rajagopal’s lifelong passion. As a child in Toronto, she saw TV news reports about California grape pickers who went on strike to protest being paid less than minimum wage. “Somehow,” she recalls, “it just spoke to me.” A decade later, a consumer boycott of Nestlé over its baby formula marketing also resonated. Later, as a politically aware teen, she witnessed the introduction of global economic sanctions against South Africa over its apartheid policies.
Socially responsible investing existed in Canada before this, she says, but when a coalition of churches began asking questions about Canadian banks doing business in South Africa, it was the first time many people realized the importance of investing and spending their money according to their values. “It all tied together,” she says.
Although Rajagopal still has to dig to learn about companies’ environmental, human rights and labour practices, there is much more information readily available now than 20 years ago. Bloomberg, a supplier of financial and market information, has increased the amount of environmental, social and governance (ESG) data available. The past decade has also seen the rise of third-party auditors that provide independent, verifiable information about companies’ greenhouse-gas emissions or supply chains.
One of the most exciting developments, she says, is the work of the Financial Stability Boardʼs Task Force on Climate-Related Financial Disclosure (TCFD). Championed by FSB chairman and former governor of the Bank of Canada, Mark Carney, and chaired by Michael Bloomberg, the TCFD is developing consistent standards for how companies voluntarily disclose climate-related financial risk information. The standards take into consideration measures that are industry-specific. Water consumption is an important consideration in the resource extraction industry, for example, but not in the financial sector.
“The task force is asking all companies to assess how climate change is currently impacting their operations, and how it might impact their operations over the next three, five, 10, 15, 20 years,” she says. “I think the investment community, globally, has come together to say that these are material risks and opportunities that we would like to see reported on in a consistent way.”
Often, companies like to report on things they’re doing well, but stay silent on things they aren’t doing well. Encouraging them to report in a common format allows investors to compare apples to apples, she says.
Another big change Rajagopal has seen in the past six or seven years is a growing trend to view environmental, social and governance issues as interrelated.
“It started out as three separate buckets. But what we’re seeing is how much these three things really bleed into each other. Gender diversity on a company’s board of directors is a governance issue. But if you’re looking at a lack of diversity, you have to start at the bottom and ask, ‘What opportunities are companies providing for women to improve their education? To have leadership opportunities at lower levels? To be mentored? What percentage of women is in management? What percentage of those move into senior management and into the C-suite?’ Many of those questions are related to social issues around women still being disproportionately responsible for a lot of child care and home care. We’re now understanding that a governance issue may also be a social issue.”
Once Rajagopal understands where her clients don’t want to invest their money, she works with them to figure out where they do. She’s says that studying risks is just one component when drawing up a list of contenders. “If we’re looking at a fossil fuel company, for example, we need to analyze the risk surrounding pipeline safety or their list of stranded assets.”
As the world moves toward a low-carbon economy, Rajagopal sees a bounty of potential investment opportunities. “What can we do to replace fossil fuels if we don’t want them to be taken out of the ground and burned? We’re looking at companies like New Flyer that make hybrid and electric buses and companies that make bioplastics. Those are growing areas.”
Off the top of her head, she lists Trojan Technologies, Zenon Environmental and Pure Technologies as successful Canadian companies that met responsible investing criteria. “[My clients] invested in each of those companies,” she says, “and each was bought up by a larger company.”
That means she’s back online digging for information on those bigger companies, too. It’s a task sheʼs happy to do on behalf of her many clients.
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