The RI wave
With increasing global awareness of environmental and social issues, responsible investment (RI) has grown in popularity and is now attracting baby boomers, Generation Xers and Millennials alike.
In fact, more and more investors hold responsible investment products in their investment portfolios. These products are also associated with the acronym ESG, whose letters stand for Environment, Society and Governance. Sometimes bandied about, ESG factors seem to cover a wide variety of elements.
The roots of responsible investment, however, go far beyond these three letters. Great principles underpin this management style and since their goal is to ensure a better future for all, they must be translated into very concrete, measurable actions which can be reproduced in various contexts.
ESG and PRI
ESG factors are the foundation of the core principles of responsible investment. Put forward by a non-profit organization and supported by the United Nations (UN) and other global policymakers, these principles, six in number, constitute the PRI (Principles for Responsible Investing).
Portfolio managers can adhere to them on a voluntary basis and include them in their management decision-making process. To date, all the external portfolio managers to whom fdp currently entrusts management mandates for its funds are PRI signatories.
The six core principles of responsible investment
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the Principles.
- We will each report on our activities and progress towards implementing the Principles.
Sustainable development, vector for change
Through these principles, the responsible investment approach seeks to achieve 17 sustainable development goals, as stated by the United Nations. These goals are vectors for global change and responses to the various challenges we face around the world, in particular those related to poverty, inequalities, climate, environmental degradation, prosperity, peace and justice.
Here are the goals, as stated by the UN:
Source: https://www.un.org/sustainabledevelopment/fr/
A positive influence
Portfolio managers can now exert great influence on companies around the world. They represent major investors, such as government or private pension funds, and as such can drive change and encourage a company to make improvements if it wants to access their sources of capital. Managers thus influence companies, which in turn influence individuals, who themselves shape their environment.
More than a signature
As the 6th principle states, managers who adhere to the PRI and who want to help create a better future must annually file various reports on their performance in applying the principles. Managers who fail to show that they incorporate these principles into their management process could be excluded from the list of signatories. Adhering to the PRI and their integration into management processes is thus not a mere formality, but a commitment that a manager makes and must fulfill.
One portfolio at a time
Through their investment portfolios, managers who embrace responsible investment seek to encourage companies and individuals to do their part to meet each of the PRI goals. It is obviously difficult to tackle these issues all at once: this is one of the reasons why we have seen the emergence of theme-based mutual funds in recent years. These funds have certain specific themes, or are sometimes limited to one: environment, energy or gender equality are among the themes that are often found in RI funds.
Participating in the movement
At fdp, we are committed to responsible investment. With our partner Mackenzie Investments, we offer three RI mutual funds, each of which contributes to one of the UN’s goals. We are proud to participate in this global movement and look forward to reaching more and more investors who are concerned about these issues.
We have also adopted a responsible investment policy that affects all our investment solutions and which excludes, in particular, companies in the tobacco, cannabis and firearms industries. Discuss this with your advisor and ask him for more details on responsible investment: he will be pleased to inform you.
To learn more about the UN’s sustainable development goals.
Stéphane Girard, MBA, CIM®, Fin. Pl.
Investment and Product Knowledge Specialist
The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.
