In Canada, pension funds lead in responsible investment

Share

Canadian asset managers are embracing the responsible investment trend, reporting that $1.5-trillion in assets in Canada are now invested using various environmental or social criteria, an increase of 49 per cent over two years.

A report scheduled to be released Thursday morning by the Responsible Investment Association shows the growth in responsible investing in Canada is being led by the pension sector, with most of the major public-sector pension plans now incorporating environmental, social and corporate governance (ESG) factors into their investment decisions. Assets invested using ESG criteria climbed to $1.5-trillion at the end of 2015 from $1.01-trillion at the end of 2013, when the Responsible Investment Association last reported on Canadian trends.

Pension plans accounted for 75 per cent in the growth of responsible investing assets, or $374-billion of the almost $500-billion in new assets under management.

Deb Abbey, CEO of the Responsible Investment Association, said both individual and institutional investors are increasingly convinced that ESG factors don't just have a positive impact on society, but also reduce investment risk and enhance returns.

The report said pension funds reported their top reasons for incorporating responsible investing criteria are managing future risks and their need to fulfill a fiduciary duty to plan members.

While institutional investors are driving the trend, the report found individuals' assets invested using responsible investment criteria have almost doubled over two years to $118-billion. The Responsible Investment Association said part of the shift is coming from millennials, who are 65 per cent more likely than baby boomers to consider ESG factors when investing, according to survey data. "We are not surprised, but we are very pleased by the continued growth in responsible investing," said John Kearns, CEO of ethical mutual fund company NEI Investments, which was a sponsor of the investment trends report.

The report analyzes the different ways investment funds incorporate responsible investment strategies, with integration of ESG factors in investment decisions emerging as the leading responsible investment strategy for the first time.

Two years ago, the Responsible Investment Association report showed the leading strategy was corporate engagement and shareholder action, which relies on methods such as dialogue with management or voting shareholder proxies according to ESG criteria.