Defining sustainable investing
Sustainable investing is about making responsible investment decisions that go beyond simply incorporating environmental, social, and governance (ESG) factors into an investment process. ESG used to be anchored in exclusion and reputational risk management. Its successor, however, is more firmly rooted in the sustainability of business models and value creation. Investing in progress through improved corporate processes is also in line with the belief that companies offering solutions to the world’s greatest challenges will grow faster than those that don’t.
Profits, planet and people
There has been a serious influx in the consideration of ESG factors over the last few years in Canada. This has challenged the financial industry to incorporate more robust data sets into their decision criteria when creating investment solutions. Evolving to a sustainable investment model – which encompasses profits, planet and people – goes a step further. Instead of simply peering into the next quarter, it’s more custom to look further down the road to the next years.
Examples of sustainable themes include:
The sustainable investments trend is not only investors-driven; advisors are firm believers in the movement as well. Sustainable investing includes evidence-based criteria into portfolios while also taking a holistic snapshot of traditional financial statements to incorporate risk assessment. The result is that these evaluations better account for business risk. Furthermore, applying a sustainable filter to actively managed products allows us to align investment portfolios with client values.
The road ahead
The standards we’re establishing are crucial to laying down the road ahead: the onus is on the finance industry to build products that look to a better future.