Canadian asset owners are increasingly evaluating allocations to the U.S. amid currency volatility, valuation weighed against expected returns in the jurisdiction, says Anya Levine, head of market strategy at Morningstar Sustainalytics.

“Canadian investors were far more likely to have a decreased allocations to U.S.-based assets in the past 12 months than the rest of the world and that was about 50 per cent in Canada versus 32 per cent for the rest of the world.”

Read: Canadian institutional investors with U.S. investments facing impact from currency volatility

According to a new survey from Morningstar Inc. — which collected responses from more than 500 investors in 11 countries with combined assets of roughly $19 trillion, including 50 Canadian asset owners averaging $49.1 billion in assets — Canadian investors are also backing off the U.S. due to the re-election of President Donald Trump.

The leading reasons to decrease U.S. investments by Canadian investors were U.S. dollar currency volatility (52 per cent), Trump’s election (52 per cent), relative valuation and expected returns by region (52 per cent).

The survey found 12 per cent of Canadian are planning to decrease U.S. allocations, compared to eight per cent from investors around the world, Levine says.

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Canadian investors (38 per cent) were more likely to identify the current U.S. administration as a very material issue for their portfolios compared to asset owners in the rest of the world (31 per cent). Indeed, it isn’t only Canadian investors looking to diversify from the U.S. investment market — the survey found four in ten global asset owners report reducing or planning to reduce allocations. Three-quarters (76 per cent) said ongoing trade disputes are material risk to their investments.

Canada is also forging its own path when it comes to environmental, social and governance investing, with Canadian asset owners citing stakeholder pressure (45 per cent), fiduciary responsibilities or requirements (45 per cent), ethical or moral principles (43 per cent) as the leading factors for incorporating ESG considerations more frequently than global investors.

“Canadian investors [highlighted] portfolio decarbonization as the preferred method for promoting transition readiness,” says Levine, noting the broader investment community was focused instead on climate transition risk engagement and real-world emission reduction.

Read: Institutional investors reconsidering ESG model: report

The most popular barriers for ESG integration — impact on returns, lack of standardized data and difficulty reporting —were reported at lower percentages among Canadian investors compared to the rest of the world, the survey said.

Based on the results, Levine says Canadian stakeholders are putting more pressure on organizations to diversify allocations when considering ESG compared to regions where investors are more comfortable managing existing allocations in high-emitting companies with a target to reduce emissions over time.

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