Advisors are always looking to gain an edge for their investor clients. In assessing potential holdings for a portfolio, the extent to which a company has embraced diversity could be a factor.
That’s the message from Marie-Justine Labelle, head of responsible investment at Desjardins Investments.
Increasingly, Canadians want to align their investments with their principles. Moreover, there is a mounting body of evidence showing a relationship between returns and strong environmental, social and governance (ESG) performance. Both are reasons why responsible investing (RI) is growing.
Dig deeper on the human resources front and the business and investment case for diversity becomes clearer, Ms. Labelle says. Why should you pay more attention to a company’s diversity when identifying growth opportunities? What’s the importance of gender diversity? How does the investment industry itself fare in this area?
Ms. Labelle addressed these questions in a recent interview.
A survey from the Responsible Investment Association shows that 72 per cent of Canadian investors are interested in RI.[i] Why is that number so high?
It’s profitable, but beyond that, many Canadians feel that investing in products that reflect their values is the right thing to do. They’re starting to realize that their investment choices could contribute to shaping the world they’ll live in tomorrow. More and more people want to spur positive social outcomes through their investments.
Are advisors delivering on that desire?
They’re coming around. Many investors expect their advisors to bring up RI, but advisors assume that if their clients care about it, they’ll talk about it. Advisors need to take the responsibility for initiating that conversation.
Advisors are not obligated, for now, to cover ESG considerations as part of the know-your-client procedures, but they should do so in order to fully meet their clients’ needs. It’s interesting to look at how Europe is paving the way on this. A new regulation is setting expectations on advisors to include sustainability in their investment advice to clients.
Looking at RI, one component is organizational diversity. That includes the traditional focus – gender, culture, ethnicity, race, sexual orientation, abilities and disabilities – and the range of experiences and perspectives that people bring. Why is a focus on diversity good for business?
The first part is around talent. If you genuinely value diversity, that will show through your talent acquisition. You’re more likely to get the top candidates.
The link between a diverse workforce and performance is really about seeing things differently. If you appreciate people for being different from you, you’re open to ideas. That’s an environment ripe for innovation. The issue is valuing differences as a strength for the organization.
Last year, Desjardins Investments launched Desjardins SocieTerra Diversity Fund, which invests in companies that advance diversity in their governance and workplace policies. Why was it important to promote that through an RI portfolio?
At Desjardins Investments, diversity is one of our priorities. We conduct robust ESG analysis across our SocieTerra line of funds and wanted to put the spotlight on this issue in one specific fund.
Beyond looking at financial performance, your portfolio submanager, Lazard Asset Management, wants to invest in certain types of companies: those with a commitment to empowering women, and that have at least 30 per cent female representation on their board and 15 per cent on their executive committee. Is getting gender-related information a challenge?
Some progress on this front has been made over the past few years, but data availability remains an important challenge. That’s why portfolio managers leverage the relationships they have with their investee companies to have this dialogue – to understand their culture and their appetite for improvement.
In selecting Lazard, did you apply the same criteria to them as far as their gender diversity? How important is it, in general, that the investment firms managing your funds are progressive in this area?
We did an analysis on portfolio managers. If a firm wasn’t walking the talk, we doubted its ability to apply that mindset to investment decision-making.
All investment firms that manage Desjardins Funds complete an ESG due diligence questionnaire. Part of it focuses on diversity: policies and procedures to ensure equal opportunity and pay equity. We use the questionnaire to raise awareness and to try to increase diversity performance in the industry.
The CFA Institute has developed a draft diversity, equity and inclusion (DEI) code to set standards within the investment industry in Canada and the U.S. How do you feel the industry is doing when it comes to diversity?
The CEO of the CFA Institute happens to be a woman. If you look at the DEI code, the term she uses to describe her opinion of progress in the industry is “profoundly disappointed.” There’s recognition that we’ve been talking about diversity but it has taken a long time to see change on the ground. That’s why Desjardins has ambitious targets for our company, because we feel it’s an urgent issue. That’s at the core of our values.
[i] Responsible Investment Association (RIA), 2020 RIA Investor Opinion Survey: Canadian Investor Perspectives on Diversity & Inclusion, October 2020, October 15, 2020, p. 7. [cited February 1, 2020].
Advertising feature produced by Globe Content Studio with Desjardins. The Globe’s editorial department was not involved.