Canadian investment managers had $3 trillion in assets using responsible investment strategies as of Dec. 31, 2021, down slightly from the $3.2 trillion reported in 2019, according to a survey by the Responsible Investment Association.
The survey, which polled 77 asset managers and 13 asset owners, found more than nine in 10 (94 per cent) respondents are using environmental, social and governance integration as a responsible investment strategy in 2022, an increase from 89 per cent in 2020. On average, respondents using ESG integration do so across 94 per cent of their responsible investment AUM and almost all respondents using ESG integration do so in combination with at least one other strategy, including negative screening, corporate engagement, thematic investments, positive screening, norms-based screening and impact investing.
Almost nine in 10 (88 per cent) respondents said they have a formal responsible investment policy statement, down slightly from 91 per cent in 2020. Among these respondents, the vast majority stated they have a formal ESG integration program (96 per cent), shareholder engagement policy (98 per cent) and proxy voting guidelines (98 per cent).
More than two-fifths (43 per cent) of respondents ranked risk minimization as their top reason to consider ESG factors, followed by improved returns (65 per cent); fiduciary duty (46 per cent); client/beneficiary demand (42 per cent); mission, purpose or values (36 per cent); social or environmental impact (20 per cent); and legislative/regulatory requirements (four per cent).
When asked to identify the ESG factors/screens they systematically incorporate into their investment decisions, respondents cited greenhouse gas emissions (85 per cent); climate change mitigation (84 per cent); board diversity and inclusion (80 per cent); human rights (79 per cent); diversity, equity and inclusion (79 per cent); climate change adaptation (76 per cent); labour practices (76 per cent); energy efficiency (73 per cent); health and safety (70 per cent); and executive pay (65 per cent).
Additionally, more than two-thirds (68 per cent) of respondents said they’re currently measuring the carbon intensity of their portfolios, while an additional 18 per cent are in the process of starting this measurement. Nearly a third (30 per cent) said they have GHG emissions reduction targets, including 13 per cent who said they have targets for scope one, two and three emissions. Among respondents with GHG targets, more than six in 10 (63 per cent) have interim targets and 54 per cent have detailed plans to meet their targets. And while 70 per cent of respondents said they don’t currently have GHG emissions reduction targets, more than half of these respondents said they’re in the process of setting targets.
The survey also found mistrust/concerns about greenwashing (60 per cent) is the most significant deterrent to growth in responsible investment, followed by lack of standardized ESG disclosure frameworks/standards (57 per cent), lack of reliable data (41 per cent), lack of qualified advice/expertise (26 per cent), lack of legislative/regulatory requirements (23 per cent), performance concerns (23 per cent), lack of awareness (18 per cent), lack of viable products/options (17 per cent), investment/portfolio risk concerns (13 per cent) and conflict with fiduciary duty concerns (nine per cent).