MBA, CIMTM, Fin. Pl.
Investment Specialist, Products Knowledge
A disruptive virus
The COVID-19 health crisis has had many repercussions on our lives. The lockdown put in place to counter the spread of the virus put an end to, among other things, the longest bull market in history. Even today, the second wave continues to roil markets around the world. But has the virus also shaken the Environmental, Social and Governance (ESG) considerations of companies and investors?
Those that stand out
Let’s look first at the business situation. The pandemic has had the effect of shedding more light on the social aspect (the “S” in ESG) of our communities, whether it is related to personal life or to job or professional activities. The slowdown in industrial and manufacturing production has also spilled over to various environment-related projects (the “E” in ESG).
In this pandemic environment, many actions and new procedures had to be put in place to provide a safe work environment for employees. However, not all companies have had the same success in this area. Many have also seen a decline in their ESG rating due to their lack of rigour in protecting their workers.
Others, on the contrary, have taken prompt action internally and have even gone so far as to sacrifice their short-term profits to ensure the well-being of both their employees and their customers. In fact, the crisis has strengthened certain social traits of company management. The actions of these companies will surely lead to a deeper sense of belonging and commitment among their employees and consumers. The environmental aspect will always remain a key consideration but, today, the social aspect has become a defining corporate value.
ESG and performance: a star duo
In terms of investment, the COVID-19 crisis has sounded the alarm on the importance of including extra-financial elements such as ESG criteria in the grid of factors to be favoured. The reason is that financial statements do not say everything about a business and its sustainability.
It is interesting to note that, since the start of the year, the integration of ESG factors has stood out as one of the characteristics most correlated with performance. From January 1 to September 21, 2020, the MSCI ACWI Index gained 2.93% in Canadian dollars, while the MSCI ACWI ESG Leaders Index returned 4.12%. To date, the results show that integrating ESG factors contributes to better portfolio performance.
In the crosshairs
The importance of ESG criteria could increase. While the health crisis has alarmed some investors, the same goes for our governments. It is increasingly clear that global warming will lead to stricter environmental regulations due to more widespread awareness of its adverse effects on humans and the planet.
In addition, companies whose governance is questionable regularly make the headlines and come in for sometimes harsh criticism in the public square.
Investing for the future
At Professionals’ Financial, we have fully understood the importance of ESG factors, whether in terms of corporate commitment or portfolio management.
- More than two years ago, we adopted a responsible investment policy that incorporates ESG criteria into our investment decisions.
- In each of the funds that we manage with full discretion, we completely exclude companies in the tobacco and cannabis industries, as well as weapons.
- We have also entered into a distribution agreement for three responsible investment theme funds with the firm Mackenzie Investments:
These funds have been performing very well since the start of the year, with all three in the first or second quartile of their category in the Morningstar rating. The Mackenzie Global Environmental Equity Fund is particularly impressive, with a year-to-date return as at September 21 of 13.44% (after fees), while the median for its category is -3.02% for the same period.
A great success
Responsible investment is emerging as a winner in this difficult phase we’re going through. It has not only generated interest and buy-in from investors, but above all a better understanding of the importance of social, environmental and governance factors in all sectors and all asset classes. An importance that translates into better performance and a much brighter future for the companies that adopt them.
If you want to learn more about our responsible investment offer, talk to your advisor. He will be happy to discuss it with you.
Stéphane Girard, MBA, CIMTM,Fin.Pl.
Investment Specialist, Products Knowledge
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.
Mackenzie Global Sustainability and Impact Balanced Fund, Mackenzie Global Leadership Impact Fund and Mackenzie Global Environmental Equity Fund are offered by Mackenzie Financial Corporation, which acts as portfolio manager for these funds.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns net of fees and expenses payable by the fund including changes in security value and reinvestment of all dividends/distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
The Morningstar Risk Adjusted Return (MRARs), commonly referred to as the Star Rating, relate the risk-adjusted performance of a fund to its peers with the same CIFSC (Canadian Investment Fund Standards Committee) Fund category for the period ended as noted and are subject to change monthly. The ratings are an objective, quantitative measure of a fund’s historical risk-adjusted performance relative to other funds in its category. Only funds with at least a three-year track record are considered. The overall star rating for a fund is a weighted combination calculated from a fund’s 3-, 5- and 10-year returns, as available, measured against the 91-day treasury bill and peer group returns. A fund can only be rated if there are a sufficient number of funds in its peer group to allow comparison for at least three years. To determine a fund’s rating, the fund and its peer are ranked by their MRARs. If a fund scores in the top 10% of its category, it receives five stars (High); if it falls in the next 22.5% , it receives four stars (Above Average); the next 35% earns a fund three stars(Neutral or Average); those in the next 22.5% received two stars (Below Average); and the lowest 10% received one star (Low). For greater detail, see morningstar.ca.
For the period ended on August 31, 2020, the returns of the Mackenzie Global Environmental Equity Fund are as follows: 30.62% (1 year – 318 funds) and 23.67% (since inception – October 17, 2018).
For the period ended on August 31, 2020, the returns of the Mackenzie Global Leadership Impact Fund are as follows: 10.31% (1 year – 2,049 funds) and 9.12% (since inception – October 16, 2017).
For the period ended on August 31, 2020, the returns of the Mackenzie Global Sustainability and Impact Balanced Fund are as follows: 8.88% (1 year – 1,621 funds) and 5.42% (since inception – October 16, 2017).
© 2020 Morningstar Research Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is not a guarantee of future results. Source: Morningstar Direct and Professionals’ Financial, as at August 31, 2020.