While all environmental, social and governance factors are increasingly important to Canada’s institutional investors, it’s the social aspect that’s been a key driver of investment choices.
David Ryan, executive vice-president of corporate and financial communications at Edelman Canada, says 74 per cent of Canadian institutional investors surveyed in 2020 prioritized social factors over environmental and governance, a 25 point increase over 2019 and the largest percentage among the six countries surveyed.
The events of 2020 have played a large role in shaping this view. “That’s a function of the [coronavirus] pandemic and the transformative social justice movements like Black Lives Matter and the increased focus on the need for diversity and inclusion across Canadian businesses of all shapes and sizes. It’s become not just a way to manage risk in the system for a business, but also an opportunity to improve business and create value.”
Diversity, equity and inclusion initiatives were the top social factors considered by institutional investors surveyed, he says, with 80 per cent of respondents stating they now screen for DEI when considering where to put their money. In particular, the rise of the Black Lives Matter movement since last spring has sharpened investors’ focus on the need for diversity and inclusion at all levels of an organization, particularly at the board and management level.
“It’s no longer a nice-to-have, it’s an absolute imperative to have a truly diverse and inclusive leadership team and workforce. We’ve seen that trend emerge over the last two years and it’s sharply accelerated with movements like Black Lives Matter that have highlighted the need for this transformation and elimination of systemic racism across society.”
And an increased focus on social initiatives is a good indicator of a company’s ability to weather economic storms, Ryan says. “A strong social initiative within an organization creates resilience, which in turn creates or preserves value at times when there’s major shocks to the system, like the one presented by the pandemic.”