The ESG space has gone parabolic over the past few years, so it’s hard to narrow it down to just one big development. I think Canada’s Expert Panel on Sustainable Finance was a game changer because it started a conversation about what sustainable finance means in the Canadian context, and it provided a blueprint for the ESG community to identify and leverage opportunities.
For example, the panel recommended that Canada’s asset management community should establish a platform for institutional investors to engage with high-carbon emitters. That inspired the RIA to work with the Shareholder Association for Research and Education, Ceres and the UN-backed Principles for Responsible Investment to establish Climate Engagement Canada, which is definitely one of the biggest ESG developments we’ve ever seen.
The Canadian Investor Statement on Diversity and Inclusion and the Canadian Investor Statement on Climate are also high on the list. Since we launched the D&I statement in 2020, it’s been signed by over 50 investors managing about $4 trillion in assets, and the climate statement we just launched before COP26 has already been signed by 36 investors managing some $5.5 trillion. These collaborative initiatives are moving the market, and I love seeing the industry take big steps forward like this together. National collaboration is something we do well in Canada, and we don’t see it happening on this scale in other markets.
What area of ESG has moved most slowly? To what do you attribute this?
I get a little sad when I look at retail market adoption. It’s great to see the uptick in assets flowing to ESG funds since the pandemic started, but it’s still just a drop in the bucket. Investor education is a barrier here, but, as an industry, we need to meet investors where they are. We need to make it easier for investors to understand this stuff.
I think players in the financial services sector are really good at innovating and finding ways to differentiate their products and services, but when you push innovation and differentiation far enough, you end up with jargon that’s overwhelming to non-specialists. This obviously leads to confusion, and confusion leads to investor inertia.
Leading advisors are doing ESG training and talking to clients about responsible investments, but most still aren’t. So, when you combine investor inertia with advisor inertia, the drop in the bucket becomes easier to understand.
Innovation is great, and differentiation is essential to compete, but we need to channel those forces in ways that help the investor, rather than confuse them.
What is your response to ESG backlash, resistance and concerns about greenwashing? How has this response evolved over the past eight years?
I assume you’re talking about [Canadian entrepreneur] Tariq Fancy and the like. [Editor’s note: In this essay, Fancy invited rebuttal to his ideas.]
Every single head of ESG in the country is terrified by the risk of their asset management firm being called a greenwasher. And, as asset managers do, they’re going to manage that risk. In practice, this means they’re going to avoid actions that could lead to a credible greenwashing claim.
In other words, very few asset managers in Canada, if any at all, are intentionally misleading investors because it’s not worth the risk.
The problem comes down to the jargon and complexity of responsible investing. The drive for innovation and differentiation are contributing factors here.
In addition, many people see ESG on a fund and they assume this means the fund should be perfectly green and exclude anything that’s not. But the world isn’t perfectly green and sustainable, and investors can play a role in making it more sustainable through engagement.
Just look at the case of [activist investor] Engine No. 1 and Exxon Mobil. If Engine No. 1 had sold its shares in Exxon, it wouldn’t have been able to get three climate-conscious directors on the company’s board. Whereas selling its shares would have had zero impact on Exxon and the climate, engagement had a huge impact on the company’s climate governance. And corporate sustainability starts at the top.
This example shows how funds don’t need to be composed of strictly green holdings to make an impact. Taking a stake in a company and voicing concerns over ESG issues can be highly impactful while enhancing long-term shareholder value.
A large part of your tenure at RIA has involved education. What would you recommend as the “next-level” areas of education for eager students?
I think impact investing is going to be the next big differentiator for asset management firms, so I expect to see more and more focus on impact measurement. Investors increasingly want to know the impact of their investments, so there will be a growing number of opportunities for professionals with sound knowledge of impact measurement and reporting. Impact education is a big opportunity.
What’s your best advice to our readers (inclined or not toward responsible investing)?
All Canadian investment professionals should be familiar with the impending Transition Finance Taxonomy, as this framework is going to unlock a new market for financing Canada’s energy transition. The taxonomy is expected to be delivered by the end of this year.
I would also suggest that investment professionals should be familiar with the work of Canada’s Sustainable Finance Action Council and the Net-Zero Advisory Body. These initiatives are shaping the future of sustainable finance in Canada. The RIA is hosting Transition Finance Week from Nov. 29 to Dec. 3 to cover these topics and more.
For advisors, I would suggest that your clients are likely warmer to conversations about responsible investment than you may think. Climate change, diversity and other ESG issues are top of mind for so many people these days. Don’t worry if you’re not an expert in these topics; research has repeatedly shown that your clients will likely appreciate you bringing it up. Of course, if your clients show interest, you’ll likely need to invest in some education at some point. But it costs absolutely nothing to see how your clients feel about sustainability, and bringing it up could be the difference between losing and retaining a client.
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.
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.
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.
