Responsible investment

Certain NBI Funds and ETFs may invest in securities related to fossil fuels. We believe that immediately and unilaterally excluding all these companies would not be to the advantage of investors or the people who still depend on these companies for their livelihood.

We believe in support and dialogue, and we ensure that these companies have solid plans to face the energy transition.

This approach is also recognized by several experts as being the most effective for decarbonizing the economy, not just your portfolio.

Discover Net Zero Asset Managers.

Responsible investment has many advantages: better risk management (environmental, social, governance) can contribute to improving financial performance, and can contribute to positive social and environmental changes.

Here are some of the findings of a meta study based on data from more than 1,000 studies published between 2015 and 2020 on the performance of ESG investing.

• ESG-driven improvements in financial performance become more pronounced over the longer term.
• ESG investment seems to offer protection against bear markets, particularly in the event of social or economic crisis.

Investing in a low-carbon future improves financial performance.

Study available here

By integrating ESG criteria, responsible investors seek to invest in companies that adopt sustainable practices, have good risk management and are well positioned to prosper in the long term. This may include companies that adopt policies to reduce carbon emissions, promote diversity and inclusion, have policies to protect human rights, and so on.

In the short term, finding the means to implement sustainable practices may require significant initial investment. For example, a company may need to invest in clean technologies or change its production processes to reduce its carbon footprint.

Numerous studies have shown that companies that adopt sustainable practices and incorporate ESG criteria into their business strategy tend to be more resilient, attract talent, manage risk more effectively and generate long-term value for shareholders.

Read the ESG and financial performance study for more information.

There are two types of climate risk that impact portfolios. Physical risks are the direct consequences of climate change (storms, floods, “sea-level” rise), while transition risks are linked to political policy, regulatory and technological changes aimed at achieving carbon emission reduction targets.

In other words, physical risks are linked to the climate, and transition risks are linked to human decisions. The financial consequences of physical risks are immediate, while transition risks have indirect consequences over the medium and long term. It is important to consider both types of risks for effective management of portfolio climate risks.

In January 2022, the Canadian Securities Administrators issued Notice 81-334, which aims to improve the disclosure of investment funds in relation to criteria ESG. Despite notable advances to provide greater clarity on what constitutes a so-called “responsible” product, as with any investment product, it is important to carry out research before investing.

To know if a financial product is truly responsible and which approaches are favoured, you must consult the prospectuses. Information on the responsible investment approach should be included in the fund's investment objective or strategy.

It’s also essential to regularly update your knowledge to master the language and important themes in responsible investing.

At NBI, all our portfolio managers are selected and evaluated according to our OP4 + process, including their responsible investment practices. This is our way of ensuring we do business with partners who have high standards of “responsible” investment and avoiding greenwashing.

Yes, it is possible that some companies consider environmental, social and governance (ESG) criteria primarily with the aim of generating good investor perception rather than through a commitment to sustainability and social responsibility.

These companies may use greenwashing or social washing practices to give the impression that they are engaged in responsible initiatives, without integrating these principles into their business operations. They may implement one-off initiatives or marketing campaigns that seem to respect ESG criteria, but do not necessarily reflect an actual strategy or a deep integration of ESG principles into their activities. Regardless, with the increasing standardization surrounding ESG data, it is becoming more complicated for companies to share untruthful information.

NBI portfolio managers can evaluate companies' ESG programs to detect possible questionable practices.

Some funds incorporating responsible investment strategies may have higher fees than traditional funds. But it is also possible to find them on the market with relatively low costs.

The important thing to remember is that the investor values ESG. According to recent research, they are willing to pay 20 basis points more per year for an investment in a fund with an ESG mandate compared to an identical mutual fund without an ESG mandate.

Source: Baker, Malcolm, Mark Egan, and Suproteem K. Sarkar. "How Do Investors Value ESG?" NBER Working Paper Series, No. 30708, December 2022. (Harvard Business School Working Paper, No. 23-028, November 2022.)

NBI Sustainable Solutions uses the 17 United Nations Sustainable Development Goals (SDGs) framework in their stock selection process. The SDGs constitute a universal call to action established in 2015 by 193 member states, "to end poverty, protect the planet and ensure peace and prosperity for all people by 2030. "(United Nations, 2020).

The SDGs represent a much broader sustainability framework than ESG issues. The most important point of the SDGs is to "leave no one behind". The SDGs consider all global macroeconomic issues important to all stakeholders, businesses and countries.

To learn more about the SDGs as an investment framework, read this NBI article.