Investment

UTAM looks under the hood at investment managers' ESG approaches – Benefits Canada

Published

4 years ago

September 18, 2020

Yaelle Gang, the Canadian Investment Review | September 18, 2020

With a team of about 30 people, the University of Toronto Asset Management Corp. managed more than $11 billion of the university’s endowment, pension plan and short-term working capital assets as of the end of 2019.

When the UTAM first looked at responsible investing, it considered what it wanted to accomplish and how to do that, given its small team and the fact that it predominantly invests through funds and not directly, says Daren Smith, the organization’s president and chief investment officer. “How are we going to integrate these considerations as part of our manager selection and monitoring process?”

Read: Considerations for integrating ESG into fixed income

The UTAM decided to embed responsible investing across the organization and has implemented a comprehensive approach to evaluating managers, which includes a relevant section in its investment due diligence memos. “Of course, we’re going to continue looking at performance, people, process and philosophy, but now we’ve added this additional lens, which is how managers do responsible investing.”

However, Smith notes it can be difficult to look under the hood at a manager’s approach. “The reality is there’s a lot of marketing spin on responsible investing and you really have to get into the weeds many times just to figure out what a manager is actually doing.”

To overcome the challenge on the public equity side, the UTAM is using an existing third-party system that analyzes position-level data to evaluate a manager on ESG metrics based on an ESG data feed from MSCI Inc. It does so by collecting manager holdings at each month-end going back five to 10 years, depending on the length of the track record, and uploading the data into the system.

Read: Short selling could impact company ESG behaviour: study

The system allows the organization to look at a manager’s portfolio characteristics on the environmental, social and governance sides, he says, and then the UTAM uses the data along with other qualitative and quantitative information to evaluate that manager.

“Then we’re also looking for names where there are some perceived issues coming out of the ratings from MSCI,” says Smith, noting the organization tries to be thoughtful about how it talks to managers about these names, particularly where it looks like there are potential ESG considerations.

When it comes to ESG, the UTAM also considers the investment holding period. “Many of the ESG concerns are more long term. So we think that for private equity, ESG considerations would almost always be very relevant. And there are some other strategies that are perhaps more short term in nature; for example, on the hedge fund side, we have some shorter frequency strategies where the holding period might be just a few months as opposed to multiple years, where we think it’s less relevant.”

Getting to know
Daren Smith

Job title: President and chief investment officer

Joined UTAM: 2008

Previous role: Partner and director of manager research at Keel Capital, which at the time managed investments for what’s now the Nova Scotia Health Employees’ Pension Plan

What keeps him up at night: Employee mental health and engagement amid the coronavirus crisis

Outside of the office he can be found: Spending time with his children, travelling and playing golf

The organization’s approach for public equity doesn’t work on the private side because it uses data from a provider that doesn’t have the same information available for private assets. For these assets, the UTAM relies on a series of questionnaires and conversations with managers.

Read: U of T Asset Management’s pension portfolio returns negative 1.6% in 2018

“We don’t have a system like we do on the public side for privates, but to some extent, those portfolios tend to be very concentrated and it’s easier to take that one-off approach where you look at individual holdings from prior funds.”

Overall, Smith’s advice for small or mid-sized plan sponsors investing through funds is to start slowly and have good discussions with their boards and investment committees to develop objectives and a game plan. “It could be a multi-year game plan, but it is important to start and to make progress. Things evolve and there is a lot that organizations of our size can do, but it does take time and effort and you do need buy-in from the board or the investment committee.”

Yaelle Gang is editor of the Canadian Investment Review.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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