Investment

Nine terms you need to know to be a more responsible investor

Published

2 years ago

January 17, 2023

As responsible investing becomes more popular, terms like shareholder engagement can still be confusing.

Improved fluency in the language of responsible investing (RI) can help investors have more productive conversations with their advisors, and better explore options, says Tim Nash, a Toronto-based financial planner at Good Investing.

“It’s challenging to keep up with the terminology in this fast-growing space. There is confusion about the different approaches falling under the large RI umbrella.”

A recent report by Franklin Templeton Investments noted that 61 per cent of Canadian respondents deemed environmental, social and governance (ESG) issues to be important considerations for investing. Only four in 10 knew what ESG involves.

Those interested in pursuing this style of investing in 2023 need to know these nine terms in the RI glossary:

Responsible investing. This broad term covers any investment strategy that incorporates ESG factors, according to the United Nations’ Principles for Responsible Investment. Those factors can be wide-ranging, from climate change, to human rights, to executive pay.
ESG integration. With publicly traded companies, investors and asset managers can analyze the performance of ESG factors such as greenhouse gas emissions or diversity in the C-suite, along with financial data. The quality of results depends partly on the trustworthiness of the available information, according to the Centre for Sustainable Finance at the University of Cambridge. Beware of “greenwashing,” says Mr. Nash, where companies make claims to reduce emissions, for example, but fail to follow through with reportable, measurable actions.
Sustainable investing. RI and sustainable investing are often considered interchangeable, Mr. Nash says. Companies with strong ESG metrics are generally considered more sustainable because they’re addressing a range of material risks that could have a negative impact on their profitability. The idea of this investing approach is to find businesses that can sustain growth well into the future.
Shareholder engagement. As shareholders in publicly traded companies, large RI investors such as pension and endowment funds often seek to engage the organizations to address unmet ESG concerns and manage risks. That can include dialogue with corporate leadership or shareholder action such as putting forward motions at annual meetings. “Through these techniques, shareholders exercise their rights and privileges and have an impact on corporate policy,” notes a white paper by Desjardins Group.
Divestment. If engagement fails, investors might decide to sell their position in a company. Divestment has also come to mean screening out companies involved in fossil-fuel production, states an RBC Global Asset Management report.
Negative screening. Divesting of fossil fuels represents a further evolution of negative screening, a strategy made popular in the 1990s when RI was called “ethical investing.” At the time, the approach often involved avoiding investments related to the production and sale of tobacco, pornography, gambling, alcohol and weapons. Beyond divesting from certain sectors, some investment approaches also screen out companies with poor ESG scores overall.
Positive screening. Similar to ESG integration, this strategy uses the principles of RI to evaluate a stock’s performance. Portfolios are built by selecting only the best-performing companies on ESG metrics for their sector. Positive and negative screening can sometimes go together. “Many investors now incorporate a mix of both approaches, screening out stocks to which they’re morally opposed and proactively choosing the best stocks that are making a difference in areas they care about,” the RI information site Impactivate explains.
Thematic investing. A spin on positive screening, this involves selecting companies according to a particular RI theme, such as investing in a renewable energy fund.
Impact investing. This strategy strives to uncover investments that have a beneficial social or environmental impact as well as a financial return, notes the Responsible Investment Association. These investments – which can involve an individual bond, an equity stake in a company or a fund – provide a range of returns while also aiming to support issues such as affordable housing or health equity.

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Investment

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

Published

6 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

4 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

1 month 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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