By Canada Life | Sept. 17, 2021
Interest in responsible investing has been accelerating over the past 50 years. At first, it was about investing with values in mind, but the enthusiasm for this approach goes well beyond that today.
Research suggests companies with strong responsible investing credentials tend to be more resilient during market crises. The investment world has started to notice, and demand is growing. 72% of Canadians are interested in responsible investing, but only 28% of advisors are having the responsible investing conversation.1 Here’s why advisors need to start having these conversations with their clients.
Responsible investing has grown, driven by client demand
Responsible, or sustainable, investing means incorporating environmental, social and governance (ESG) factors into the process of selecting and managing investments. While the concept has been around since the 1970s when the first mutual fund launched with this focus, it continues to evolve and grow in popularity. Combined, net assets in ESG mutual funds and exchange traded funds (ETFs) in Canada have quadrupled since 2011, reaching over $20 billion in 2020.2
There are good reasons behind responsible investing’s results
Investors have long worried that investing responsibly meant sacrificing higher returns. However, there is ample evidence to debunk this myth. The UN Principles of Responsible Investment cites a 2018 literature review of more than 2,000 academic studies on the effect of ESG factors on corporations’ financial performance – just 10% of the studies showed a negative relationship.3
Responsible investing includes applying ESG-specific techniques to reduce volatility and highlight risks and opportunities that might otherwise be overlooked.
Assessing a company’s ESG performance provides a more thorough view of an organization’s management practices and prospects. Higher ESG scores can lead to lower costs of capital and better long-term operational decision-making.
The performance of ESG index funds demonstrates that they have kept pace with or outpaced their traditional index peers. Over the past 10 years, the MSCI Canada ESG Leaders Index has returned 8.9%, outperforming the broader S&P/TSX Composite by 149 basis points.4
For more details about Canadian ESG-focused funds, how responsible investing is considered in the investment process, and how responsible investing continues to evolve, read our full report.
Responsible investing in action
At Canada Life, aligning with current regulations and the highest ethical standards is paramount. We’re also committed to bringing quality, best-in-class investment solutions to the marketplace that help meet clients’ needs through today’s changing market dynamics. “Canada Life incorporates responsible investing at two levels – in its use of ESG elements to assess fund managers and funds, and by offering select sophisticated investment solutions designed with both responsible investing and fund performance in mind,” says Brent MacLellan, VP Portfolio Construction and Analysis.
We’re focused on providing Canadians with financial solutions that help meet their needs. That’s why we’re enhancing our managed solutions offering by adding Canada LifeTM Sustainable Portfolios – three sophisticated strategies designed to help clients responsibly invest for returns while aligning with values.
Canada Life Sustainable Portfolios are available as mutual funds managed by Canada Life Investment Management Ltd. offered exclusively through Quadrus Investment Services Ltd. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.
Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.
Canada Life and design are trademarks of The Canada Life Assurance Company.