Why now is the time to look at ESG in your fund lineup

by | Jun 6, 2022 | Group Retirement Savings, Take 5 Articles, Uncategorized

Across Canada, investors want to use the power of their savings by choosing investments that not only have strong returns but also help make a positive difference in society. ESG (environment, social, governance)-focused or sustainable investing is one way to do that.

Interest in responsible investing is growing:

  • 68% of consumers are very/somewhat interested in responsible investing for their group plans, according to surveys of individual and group product specialists, account executives, advisors, group plan sponsors and consumers conducted by Canada Life from March to May 2021.
  • The number of Canadian institutional investors who believe ESG-focused funds can outperform non-ESG-focused funds is growing (55% in 2020 compared to 34% in 2019), reports RBC Global Asset Management in its Responsible Investment Survey 2021.

You can help your members invest in line with their values without sacrificing potential returns.

Why you should add ESG to your lineup

ESG can help manage risk. Events such as the Deepwater Horizon oil spill in 2010 and corporate scandals show what can happen to performance and company reputation when ESG factors are not considered. Good ESG practices can help prevent tragedy and protect shareholder profits.

ESG can help provide stronger returns. In 2020, a report from Morningstar showed that 64 of 87 ESG equity index funds beat the most common traditional benchmarks in their categories.

ESG-focused investments can help build a better future. Fund managers can influence change by voting at annual general meetings (AGMs), connecting through letters and calls, or lobbying through the press and social media. Fund managers can also promote ESG-focused funds and make sure the majority of their investments are ESG-focused.

ESG goes beyond the environment

ESG takes a holistic view of companies and the impact of investment. Environmental concerns such as climate change and resource depletion go hand-in-hand with social and governance concerns such as child labour, Indigenous rights, employee health and diversity, executive pay, corruption, political lobbying and donations.

What’s next?

A socially conscious approach doesn’t have to come at the expense of performance. Funds that integrate ESG principles are important to consider. ESG-focused funds take that a step further by meeting certain criteria that can balance risk and returns to help build a more sustainable world.

This article is brought to you by Canada Life, sponsor of Benefits Alliance’s “Take 5 for Health Benefits” newsletter.