It isn’t just asset managers who are increasingly embracing the integration of environmental, social and governance factors into investment decision-making. An important contributor to “record inflows” into sustainable investing strategies over the past 12 to 18 months is demand from plan members, as well as individual retail investors, says Eric Monteiro, senior vice-president, group retirement services, at Sun Life Assurance Company of Canada.
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He cites a recent MFS Investment Management survey that found a clear majority of Canadian defined contribution plan members (79 per cent) were interested, or somewhat interested, in sustainable investments. Even more significant when it comes to helping Canadians meet their retirement goals, 72 per cent said they would be very likely, or somewhat likely, to boost their contributions if their workplace plan offered sustainable investment options. Meanwhile, more than half — 58 per cent — believed their retirement investments could play a role in addressing sustainability issues.
“People care today not only about the fact that companies have great products, services and experiences, but how they got there — what decisions are they making, what do they stand for, what are their supply chains like?” says Monteiro. “We see that very clearly in the workplace, too.”
The coronavirus pandemic only strengthened this trend, reminding many people of our fragility and, by extension, our planet’s fragility, he suggests. The MFS survey found that 73 per cent of clients think companies have a greater responsibility to support sustainability because of the coronavirus crisis.
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“I hear it directly from employers, who in turn hear it from their employees. That translates into a lot of interest from advisors and consultants.” These days, Monteiro says, “there isn’t a single pension committee meeting where [ESG] doesn’t come up.”
For plan members, it’s not all about the “E” either. The MFS survey also found that, among Canadian plan members, 35 per cent said environmental, social and governance factors are equally important, with 18 per cent prioritizing environmental factors, 17 per cent prioritizing social factors and 12 per cent prioritizing governance factors. Just 18 per cent said investment decisions shouldn’t be based on ESG factors.
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Monteiro believes ESG-integrated investment managers and funds will continue to demonstrate outperformance, which should further build interest in sustainable investing strategies. At the same time, he expects more standardized frameworks will emerge to help employers, consultants and advisors assess whether an investment manager is effectively integrating ESG issues into investment decision-making.
He also anticipates plan members will become even more vocal about sustainable investing in the future. While many used to make allocation decisions based largely on returns, Sun Life in its capacity as a recordkeeper now hears regularly from employees who want to know how to tell which funds are leading on ESG- and sustainable-related investing. As that trend continues, he suggests it will contribute to increasing demand for sustainable investing transparency.