More and more investors are seeking portfolios that foster a sustainable world. They’re looking to use their savings as a lever for change. Investment products that fill this need are becoming more widely available. For advisors and their clients, this approach offers a double benefit: the potential of positive returns and a positive impact.
Responsible investing (RI) infuses portfolios with environment, social and governance (ESG) criteria. That includes companies’ performance on issues such as climate change, water usage, labour standards, human rights, and diversity and inclusion.
“RI encompasses a variety of approaches, from impact-themed investing (e.g. in energy transition), to exclusion strategies (e.g. civilian firearms and tobacco industries) to shareholder engagement to encourage companies to improve their ESG policies,” says Sébastien Vallée, senior director at Desjardins Investments.
Rising interest in RI among investors has led to rapid growth in this investment sector. RI assets under management (AUM) in Canada increased by 48 per cent in the two years ended Dec. 31, 2019 to almost $3.2-trillion, according to the 2020 Canadian RI Trends Report.
Around the world, RI assets continue to grow in most regions. The Global Sustainable Investment Alliance reported that Canada is now the market leader with the highest proportion of sustainable investment assets.
There’s a misperception that RI means settling for inferior potential returns. The truth is far from it. ESG investing strategies have performed as well as, if not better than, comparable non-ESG strategies during the pandemic, according to a recent S&P Global Inc. report. Of the 26 U.S. equity ESG funds it tracked in the first year of the pandemic, 19 outperformed their benchmark, the S&P 500.
“Performance always matters to investors,” says Mr. Vallée. “Experience shows that ESG integration can be a great tool to manage risk and identify opportunities that arise as the economy transitions.”
By showing evidence of both financial and ESG potential benefits, advisors can demonstrate their expertise in RI and build more credibility with clients.
One example of an interesting fund is Desjardins SocieTerra Positive Change Fund. The philosophy behind this fund is to deliver attractive long-term returns and positive change by contributing to a more sustainable and inclusive world.
Desjardins Investments offers investors access to a concentrated global equity strategy through a mandate of publicly traded, high-quality growth companies. They’re selected because they can create a positive impact on social inclusion and education, environmental well-being, and accessible health care and quality of life, among other sustainable-development goals.
In fact, the Desjardins SocieTerra Positive Change Fund uses the United Nations 17 Sustainable Development Goals framework as a key guideline for selecting securities.
The fund is managed by Baillie Gifford Overseas Limited, one of the world’s leading asset managers for sustainable investing.
“At Desjardins Investments, we conduct robust ESG analysis when selecting portfolio submanagers,” says Mr. Vallée. “All Desjardins Funds’ asset managers complete an ESG due diligence questionnaire. This questionnaire helps select them with the expertise needed to deliver the fund’s mandate but also with responsible corporate practices.”
Empowering advisors and investors
ESG analysis is part of Desjardins’ long-time focus on RI. As an RI leader, Desjardins offers a wide array of options, such as structured products, exchange-traded funds, guaranteed investment funds and mutual funds, including its Desjardins SocieTerra Environment Fund, which was launched more than 30 years ago.
This experience has allowed Desjardins to develop RI strategies applicable to different types of investment products. Desjardins’ interest in RI ties into its mission and values: to contribute to improving the economic and social well-being of people and communities.
Advisors are looking for more than just products. The right support matters too, so they can navigate RI offerings with and for their clients. Desjardins has become a go-to information source, among others, for independent advisors whose clients are seeking to align their money with their beliefs.
“The challenge for many advisors is they are not always comfortable in providing guidance to their clients on this issue,” Mr. Vallée says.
To help investors and advisors make informed choices and understand the potential double impact of RI, Desjardins has increased its educational efforts. The firm recently received an award from the Responsible Investment Association for its advisor training programs.
“Supporting professionals on this journey with simple and credible information is crucial to us. It’s part of our DNA, because we know advisors are critical in helping investors access the right investments for their needs,” says Mr. Vallée. “With more than 30 years of RI expertise, Desjardins is a partner of choice for any advisor who wants to incorporate RI into their practice.”
This past July, the Global Sustainable Investment Alliance (GSIA) released its biennial Global Sustainable Investment Review, showing that the industry has grown to US$35.3-trillion around the world. RI assets now make up 36 per cent of global total AUM.
The review found that sustainable investment is a major force shaping global capital markets. Simon O’Connor, chair of the GSIA, said growth is being fuelled by rising consumer expectations, potential financial performance, and the increasing materiality of social and environmental issues – from biodiversity to racial equity.
As interest in RI grows, so does the size of the market. Investors who are eager to learn more about RI are looking for information and assistance to guide their decisions. Mr. Vallée says RI-qualified advisors are in the best position to help Canadians find the right investments to fit in their portfolio and with their beliefs. That’s driving positive change for their pocketbooks – and the planet.
The Desjardins Funds are not guaranteed, their value fluctuates frequently, and their past performance is not indicative of their future returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The Desjardins Funds are offered by registered dealers.
Advertising feature produced by Globe Content Studio with Desjardins. The Globe’s editorial department was not involved.