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New report shows $200-billion drop in responsible investing market share in Canada

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For more than a decade, responsible investing in Canada experienced steady upward growth. A new report says that trend has reversed itself in the last two years, as the industry struggles to respond to allegations of greenwashing and a tougher regulatory environment.  

The value of portfolios classified as responsible investments (RI) dropped from $3.2 trillion on December 31, 2019, to $3 trillion at the end of 2021, according to the 2022 Canadian Responsible Investment Trends Report published last week by the Responsible Investment Association (RIA). 

While a $200-billion drop against $3.2 trillion seems like a modest decline, the fall in RI’s share of total Canadian assets under management (all assets professionally managed for clients) was significant, plunging from 62% of $5.1 trillion in total assets in 2019 to 47% of $6.4 trillion in total assets at the end of 2021. 

RIA CEO Pat Fletcher sees this adjustment as a welcome development. 

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This reclassification reflects an increase in “conscious conservatism” by Canadian asset managers in the absence of industry- or government-regulated definitions, criteria or standards, she says, causing many managers “to err on the side of caution” and strip the “responsible investment” classification from some of their portfolios.  

This reverses a 12-year trend by asset managers (stretching back to the financial crash of 2008) to classify large portions of their assets as “responsible” or “sustainable,” even though there are no widely accepted standards for such a classification. 

“A few years ago, overall [RI] might have been a mile wide and an inch deep,” Fletcher says. “I would say we’re getting to a world where it’s a mile wide and a mile deep.” 

Reclassifying responsible funds

RIA commissioned Environics Research to collect and analyze data for the report, which included responses from 77 asset managers and 13 asset owners. Publicly available data was used for 26 additional organizations that did not complete the survey. 

The growing trend to reclassify RI assets is happening around the world as regulators become more conscious of potential greenwashing and move against asset managers who cannot substantiate their responsible or sustainable investment claims. 

The Canadian Securities Administrators (the umbrella group for Canadian securities commissions) cited greenwashing concerns earlier this year when it released new guidance for investment funds employing ESG strategies. The guidance requires managers to align their fund’s name and investment objectives, disclose investment strategies, and explain how environmental, social and governance factors are evaluated and monitored. 

Canada’s relatively light-touch approach contrasts with much bolder action in the U.S., where the Securities and Exchange Commission (SEC) is cracking down on ESG funds and advisors. On November 22, the SEC announced a fine of $4 million against fund company giant Goldman Sachs Asset Management, saying it had failed to have written ESG policies or to follow them consistently on some of its ESG funds. 

In Europe, regulators have gone even further, establishing the Sustainable Finance Disclosure Regulation, which comes into force on January 1, 2023, requiring funds to categorize themselves as light green (Article 8), dark green (Article 9) or conventional funds (Article 6), based on the degree to which investments support sustainability. In the run-up to the new year, major asset managers in Europe have reclassified dozens of funds worth billions of euros from dark green to light green. Earlier this year, the investment rating service Morningstar reclassified more than 1,200 European-based ESG funds with more than US$1 trillion in assets, saying they don’t integrate ESG factors in a “determinative” way. 

Managers pull back on ESG integration 

Canada’s RIA, the umbrella organization for the responsible investment industry, has established seven RI strategies, which are widely recognized by the industry around the world: negative/exclusionary screening, positive screening, norms-based screening, thematic (ESG) investments, corporate engagement and shareholder action, ESG integration, and impact investing. 

RIA surveyed member and non-member asset managers and found that the most common strategy being used is ESG integration (the inclusion of ESG factors in stock analysis), used by 94% of respondents to the report. Negative screening (for instance, screening out weapons, tobacco or fossil fuels) is number two at 91%, and corporate engagement is third at 79%. 

The report says some managers, including several large firms, tightened the value of assets under the ESG integration strategy in 2021. These managers may no longer consider ESG integration as a stand-alone RI strategy, the report says, “as ESG integration has become business as usual.”  

RI industry veteran Stephen Whipp, a long-time financial advisor from Victoria, B.C., welcomed this reclassification, saying it will help bring an end to industry greenwashing. 

“We’re going to see a lot more caution about how these funds get described in the marketing materials,” he says. “If you’ve read some of the marketing material, you would think that investing this way is going to change the world forever.” 

More to be done on responsible investing

Corporate engagement through shareholder advocacy is one of the areas where investment managers are vulnerable to greenwashing accusations, says Matt Price, director of corporate engagement at Investors for Paris Compliance. He says fund managers making claims to address environmental and social issues through corporate letters and meetings need to prove the effectiveness of their actions or stop making the claims.  

“There has to be more accountability, more disclosure about what happens with engagements, and turning engagement into escalation with clear metrics and timelines for a company to change,” he says in an email. “Otherwise, it’s just more tea and biscuits.”  

The movement to reclassify ESG assets will also likely encourage the use of impact investing (investing intentionally to create measurable social and environmental change), suggests Roger Beauchemin, CEO of Addenda Capital, one of Canada’s largest asset managers, with more than $35 billion in assets.  

“We’re going to start seeing some really interesting things in terms of impact, all these projects that affect the real economy, the real society,” said Beauchemin, who also chairs the RIA board of directors, at a webcast launching the trends report. “I think that’s the next frontier.” 

Whipp says he is cautiously hopeful for the future. 

“I welcome any movement by the [responsible investing] industry towards setting some standards so that if you are claiming to be an [ESG] kind of fund, you have to have backup to support that.”  

Eugene Ellmen is a former executive director of the Canadian Social Investment Organization (now Responsible Investment Association). He writes on sustainable business and finance. 

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Amazon completes $4B Anthropic investment to advance generative AI – About Amazon

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Amazon concludes $4 billion investment in Anthropic.

Customers of all sizes and industries are using Claude on Amazon Bedrock to reimagine user experiences, reinvent their businesses, and accelerate their generative AI journeys.

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The work Amazon and Anthropic are doing together to bring the most advanced generative artificial intelligence (generative AI) technologies to customers worldwide is only beginning. As part of a strategic collaborative agreement, we and Anthropic announced that Anthropic is using Amazon Web Services (AWS) as its primary cloud provider for mission critical workloads, including safety research and future foundation model development. Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models and has made a long-term commitment to provide AWS customers around the world with access to future generations of its foundation models on Amazon Bedrock, AWS’s fully managed service that provides secure, easy access to the industry’s widest choice of high-performing, fully managed foundation models (FMs), along with the most compelling set of features (including best-in-class retrieval augmented generation, guardrails, model evaluation, and AI-powered agents) that help customers build highly-capable, cost-effective, low latency generative AI applications.

Earlier this month, we announced access to the most powerful Anthropic AI models on Amazon Bedrock. The Claude 3 family of models demonstrate advanced intelligence, near-human levels of responsiveness, improved steerability and accuracy, and new vision capabilities. Industry benchmarks show that Claude 3 Opus, the most intelligent of the model family, has set a new standard, outperforming other models available today—including OpenAI’s GPT-4—in the areas of reasoning, math, and coding.

“We have a notable history with Anthropic, together helping organizations of all sizes around the world to deploy advanced generative artificial intelligence applications across their organizations,” said Dr. Swami Sivasubramanian, vice president of Data and AI at AWS. “Anthropic’s visionary work with generative AI, most recently the introduction of its state-of-the art Claude 3 family of models, combined with Amazon’s best-in-class infrastructure like AWS Tranium and managed services like Amazon Bedrock further unlocks exciting opportunities for customers to quickly, securely, and responsibly innovate with generative AI. Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next.”

Global organizations of all sizes, across virtually every industry, are already using Amazon Bedrock to build their generative AI applications with Anthropic’s Claude AI. They include ADP, Amdocs, Bridgewater Associates, Broadridge, CelcomDigi, Clariant, Cloudera, Dana-Farber Cancer Institute, Degas Ltd., Delta Air Lines, Druva, Enverus, Genesys, Genomics England, GoDaddy, Happy Fox, Intuit, KT, LivTech, Lonely Planet, LexisNexis Legal & Professional, M1 Finance, Netsmart, Nexxiot, Parsyl, Perplexity AI, Pfizer, the PGA TOUR, Proto Hologram, Ricoh USA, Rocket Companies, and Siemens.

To further help speed the adoption of advanced generative AI technologies, AWS, Anthropic, and Accenture recently announced that they are coming together to help organizations—especially those in highly-regulated industries including healthcare, public sector, banking, and insurance—responsibly adopt and scale generative AI solutions. Through this collaboration, organizations will gain access to best-in-class models from Anthropic, a broad set of capabilities only available on Amazon Bedrock, and industry expertise from Accenture, Anthropic, and AWS to help them build and scale generative AI applications that are customized for their specific use cases.

Deepening our commitment to advancing generative AI, today we have an update on the announcement we made to invest up to $4 billion in Anthropic for a minority ownership position in the company. Last September, we made an initial investment of $1.25 billion. Today, we made our additional $2.75 billion investment, bringing our total investment in Anthropic to $4 billion. To learn more about the broader strategic collaboration between Amazon and Anthropic, of which this investment is one part, check out the stories below:

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Amazon doubles down on Anthropic, completing its planned $4B investment – TechCrunch

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Amazon invested a further $2.75 billion in growing AI power Anthropic on Wednesday, following through on the option it left open last September. The $1.25 billion it invested at the time must be producing results, or perhaps they’ve realized that there are no other horses available to back.

The September deal put $1.25 billion into the company in exchange for a minority stake, and certain tit-for-tat agreements like Anthropic continuing to use AWS for its extensive computation needs.

Amazon reportedly had until the end of the first quarter to decide whether to increase its investment to a maximum of $4 billion, and here we are just before the deadline, and the company has decided to throw in the maximum amount.

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Anthropic’s AI models are one of very few that compete at the highest levels of capability (however you define it) yet are available at scale for enterprises to deploy internally or in user-facing applications. OpenAI’s GPT series and Google’s Gemini are the others up there, but upstarts like Mistral may soon threaten that fragile triumvirate.

Lacking the capability to develop adequate models on their own for whatever reason, companies like Amazon and Microsoft have had to act vicariously through others, primarily OpenAI and Anthropic. The two have reaped immense benefits by allying with one or the other of these moneyed rivals, and as yet have not seen many downsides.

What we can take from Amazon’s decision to invest the maximum after (one must assume) getting a pretty close look at how they make the AI sausage over there is, really, pretty scant.

It makes too much strategic sense for these companies, which possess enormous war chests saved up for exactly this purpose (outspending rivals when they can’t out-innovate them), to pour cash into the AI sector. Right now the AI world is a bit like a roulette table, with OpenAI and Anthropic representing black and red. No one really knows where the ball will land, least of all the companies that couldn’t predict or create this technology themselves. But if your bitter enemy puts their chips down on red, it only makes sense for you to bet on black.

Especially if you can bet on black at a discount — which is what Amazon got here, since it could invest at Anthropic’s September valuation, which is most certainly lower than it is today.

That said, if things were looking sketchy over there — the way they must have looked at Inflection before Microsoft pounced on it — Amazon could have backed out or just invested less than the full supplemental $2.75 billion. But that might have sent a confusing signal no one wants getting out there, least of all existing multibillion-dollar investors.

We know Anthropic has a plan, and this year we’ll find out what Amazon, Apple, Microsoft and other multinational interests think they can do to monetize this supposedly revolutionary technology.

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Canada to tighten foreign investment rules for AI, other sectors

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Canada will require foreign companies to warn the government in advance before making investments or acquisitions in artificial intelligence, quantum computing and space technology, Bloomberg News reported on Tuesday, citing an interview with Innovation Minister Francois-Philippe Champagne.

The move will aid the government in conducting a national-security review before transactions get too far advanced and would-be investors may be restricted in their access to target companies’ user data or other property while the inquiry is taking place, the report said.


Click to play video: 'Canadians concerned about risk of AI generated fraud'
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Canadians concerned about risk of AI generated fraud

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The tougher rules will also apply to investments in critical minerals and potentially other sectors, Champagne said to Bloomberg.

Earlier this month, Champagne said Canada will crack down on foreign investment in the interactive digital media sector to stop state-sponsored actors from endangering national security.

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