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Why ESG May Be The Future

Ludovic Siouffi - Nov 08, 2021

In recent times, there has been a significant pivot by governments, policymakers and business leaders to support environmental, social and governance (ESG) movements.

Environmental and social change appears to be the new focus on many global agendas. This past spring, the U.S. vowed to cut greenhouse gas emissions by up to 52 percent by 2030.1 U.S. President Biden has also pledged almost $2 trillion to an infrastructure plan that focuses on shifting to greener energy, with another $1.8 trillion proposed to supporting social improvements for American families.2 Similarly, Canada has pledged a sizable cut in carbon emissions and has dedicated significant funds towards green infrastructure and investing.3 Even China, often seen as a global offender, has stated its commitment to “protect the environment and deliver social justice in the course of green transition.”4

Alongside the prioritization by global leaders, the investing world has also been pushing ahead to increase the support and transparency for prioritizing ESG factors in investing. Have you considered integrating ESG factors into your own investing? There may be varying motivations.5 Here are three:

Incorporating personal values. Many investors want their investments to reflect their personal values. Millennials are leading this charge, with around 90 percent suggesting that tailoring their investments to their values is a key priority.5 The Wall Street Journal recently reported that assets in investment funds focused partly on the environment have been growing in demand. They reached almost $2 trillion globally in the first quarter of this year, more than tripling over the past three years. Investors are putting $3 billion a day into these funds, and more than $5 billion worth of bonds and loans designed to fund green initiatives are issued every day. This past April, the world’s largest hedge fund launched a sustainable investing venture in response to client demand, as a growing number of investors indicated that ESG considerations have become part of their investing mandate.6

Making a positive impact. Some investors wish to support companies making positive changes for a sustainable future. With increased transparency, as well as a greater focus on ESG movements, there has been improved reporting and accountability by companies and business leaders. By voting with their wallets, investors can hold companies accountable in generating a positive social or environmental impact alongside a financial return.

Enhancing longer-term performance. A relatively longheld view was that investors who prioritized ESG factors often sacrificed greater returns; however, newer studies suggest that the reverse often holds true.7 Correlations exist between strong ESG practices and company performance. In fact, integrating ESG factors in a business’ operations not only contributes to the greater good, but has been shown to provide a more comprehensive view of potential risks and opportunities which can enhance longer-term performance. In the first four months of 2021, more than 70 percent of funds that invested based on ESG practices across all asset classes beat the returns of funds that didn’t have those objectives.6
 



What is Responsible Investing?

Responsible investing is the approach of using environmental, social and governance (ESG) factors as considerations within the investment process:

Environmental — How companies act as environmental stewards, including climate change, greenhouse gas emissions and pollution management, as well as water, forestry and resource management.

Social — How companies treat employees, customers and communities, including labour standards, human rights and health and safety practices.

Governance — How companies govern themselves, including business ethics practices, diversity and executive compensation.


 

Finding Your Motivation

Whatever your ESG priorities and motivations, we can assist. The Ludo Group and Canaccord Genuity have a significant amount of resources dedicated to ESG investing. Given the pivot by policymakers and global leaders in supporting the ESG movement, it is expected that there will be continued momentum within this space. The beneficiaries will include not only the planet and its inhabitants, but also those who invest wisely along the way.

Most of us want to do good for the world, and the more money we pour into socially responsible businesses, the more they can grow and the less there is leftover for irresponsible businesses.

An ethical portfolio can improve your financial future while doing good for the world. If you’re interested in learning more about ESG values or our Impact Portfolio, please give us a call or email. We would be happy to provide support and clarity.

All the best,

Ludo.

Ludovic Siouffi, MBA, CIM, RIAC
Portfolio Manager
Canaccord Genuity Corp.
lsiouffi@cgf.com
604.699.0805

 

 

 

 

1. 1. cnbc.com/2021/04/22/biden-pledges-to-slash-greenhouse-gas-emissions-in-half-by-2030

2. cnn.com/2021/03/31/politics/infrastructure-proposal-biden-explainer/index.html

3. bnnbloomberg.ca/trudeau-pledges-to-cut-emissions-by-40-to-45-per-cent-by-2030-1.1593797

4. Chinese President Xi Jinping, “For Man and Nature: Building a Community of Life Together,” U.S. President Joe Biden’s Leaders’ Summit on Climate, April 22, 2021

5. These motivating factors are not mutually exclusive; msci.com/visualizing-investment-data/esg-investing-finding-your-motivation

6. wsj.com/articles/green-finance-goes-mainstream-lining-up-trillions-behind-global-energy-transition-11621656039

7. tiaa.org/public/pdf/ri_delivering_competitive_performance.pdf; forbes.com/just-companies/#2ea3f1c82bf0; Gunnar Friede, Busch & Bassen, “ESG and financial performance”, Journal of Sustainable Finance & Investment, 2015.