Active management, a strategic edge in responsible investing

12 January 2026 by National Bank Investments

Responsible investing, when done right, can be a tool for portfolio managers to generate better risk-adjusted returns. For many, responsible investing isn’t just a “nice-to-have” anymore, it’s a way for active managers to protect capital and improve the quality of investment solutions. For advisors and investors, this means ESG factors are viewed through the lens of financial materiality and portfolio resilience.

What is financial materiality?

Financial materiality refers to information that is likely to influence the economic decisions of a reasonable investor. ESG factors that have a direct impact on a company’s performance are financially materials because they can influence investor decisions or affect a company’s bottom line. Think of safety records, governance practices, or environmental compliance they can all matter for risk and return.¹

In this article:

Three ways active managers leverage responsible investing

Using ESG factors as a strategic edge
Stewardship for long-term value creation
Unlocking opportunities in niche themes and impact areas

Using ESG factors as a strategic edge

ESG factors can be complex. But in the hands of skilled active managers, they can become a tool to anticipate risks, generate performance, and protect portfolios during market downturns.

Example: A Bloomberg study found that companies with strong safety records in mining and chemicals outperformed peers by 3.5% annually, while oil and gas firms with better environmental practices outperformed by 2.2%.²

This trend is visible in fixed income markets: the Bloomberg Global Aggregate Green Social Sustainability Bond Index has outperformed the broader Bloomberg Global Aggregate Bond Index (see graphic below). Drivers for outperformance include strong investor demand, growing awareness of sustainability issues, and favorable financial conditions in 2025.

Chart showing Bloomberg Global Aggregate GSS index outperforming Bloomberg Global Aggregate index from 2022 to 2025.

When sustainability risks are ignored, the consequences can be severe. Lack of proper analysis of ESG factors can lead to environmental disasters and governance failures that erode shareholder value and trigger sharp market corrections.

ESG controversies such as the Orpea scandal in 2022, where institutional mistreatment practices in retirement homes caused a drop of more than 90% in the share price³, or the Teleperformance controversy related to the working conditions of content moderators, which led to a loss of 34% in a single session⁴, illustrate the growing sensitivity of the markets to extra-financial risks. These cases highlight that investors are now reacting quickly to social and governance issues, and the need for active managers to consider ESG factors.

According to the latest Responsible Investment Association (RIA) trend report, ESG integration is now part of mainstream investment management in Canada⁵,96% of respondents mentioned using it. Portfolio managers are recognizing the relevance of integration relevant ESG factors within their analysis to preserve capital and build more resilient portfolios.

Incidence of use per responsible investing approach

Bar chart comparing the incidence of responsible investment approaches in 2024 and 2025: ESG integration, screening, engagement, thematic investing, and impact investing.

Source : 2025 Canadian responsible investing Trends report - RIA.
Incidence of use: percentage of respondents that apply each responsible investment approach within their strategies.

Stewardship for long-term value creation

Active managers don’t just pick stocks, they can also engage with companies through dialogues, shareholder proposals and proxy voting.

Through stewardship, active management can influence corporate behavior, improve governance, and align investments with a more sustainable economy. This means investments aren’t just chasing short-term gains they’re helping create long-term stability and value.

Stewardship is a key differentiator for active managers when they are building relationships with compagnies and following them long term in their journey to improve their practices. It signals to clients that their investments are not only managed for returns but also for long-term stability and risk mitigation.

The topics of conversation with compagnies can also be extremely broad depending on the enterprise and the sector of activities.

Bar chart comparing issues addressed by stewardship programs in 2024 and 2025: climate change, diversity and inclusion, GHG emissions reduction, ESG disclosures, work practices, board composition, executive pay,

Source : 2025 Canadian RI Trends report - RIA

Unlocking opportunities in niche themes and impact areas

Passive strategies often replicate broad ESG indices, which can limit flexibility and expose investors to market-driven trends. Active management, on the other hand, can target specific themes such as renewable energy, water security, the circular economy that align with client goals, popular economic trends, and offer attractive returns potential.

It’s not just about choosing a theme. Active managers leverage deep sector expertise, analyzing both forward-looking and historical data to help investors avoid concentration risks and market bubbles that arise when everyone chases the same trend. This insight enables more effective diversification within a theme, reducing vulnerability to single-event shocks.

Summary

The perception of responsible investing has evolved. For active managers it is increasingly about managing risk and driving performance since ESG factors can have a real impact on returns. Considering ESG factors and ESG controversies as well as engaging with portfolio companies for long term value generation are all ways active managers are leveraging responsible investing to build more resilient portfolios.

Responsible investment at NBI

Sources:

The information and opinions herein are provided for information purposes only and are subject to change without notice. The opinions are not intended as investment advice nor are they provided to promote any particular investments and should in no way form the basis for your investment decisions. National Bank Investments Inc. has taken the necessary measures to ensure the quality and accuracy of the information contained herein at the time of publication. It does not, however, guarantee that the information is accurate or complete, and this communication creates no legal or contractual obligation on the part of National Bank Investments Inc.

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Banque Nationale Investissements est signataire des Principes pour l’investissement responsable des Nations Unies, membre de l’Association pour l’Investissement Responsable du Canada et participant fondateur de l’initiative Engagement Climatique Canada.