Asset managers expand RI strategies: Survey

Global volatility has reshaped the environmental, social, geopolitical, and economic landscape over the past two years, increasing urgency for responsible investing (RI), according to a new report from the Responsible Investment Association (RIA). 

The 2022 Canadian Responsible Investment Trends Report, based on an asset managers’ survey and released on Wednesday, concluded that RI assets in Canada totalled $3.0 trillion as of Dec. 31, 2021, representing a “reliable floor,” the report said, from $3.2 trillion in 2019. 

“Greater vigilance is redefining the ‘floor’ of RI assets under management. Increased clarity and alignment are necessary to shape the slope and raise the ceiling,” RIA CEO Patricia Fletcher said in a release.

The top RI strategies used by asset managers and owners surveyed were environmental, social and governance (ESG) integration, with 94% of respondents saying they use this strategy compared to 89% in 2020, followed by negative screening, selected by 91% of respondents, up from 70% in 2020.

“While ESG integration remains well-established as the most prevalent RI strategy in Canada, responsible investors in Canada are expanding their adoption of additional RI strategies within their AUM,” the report said. 

The top two reasons survey respondents gave for investing responsibly were minimizing risk and improving returns over time. Other reasons included fulfilling a fiduciary duty and fulfilling client and beneficiary demand.  

When asked which ESG factors they consider the most, respondents pointed to greenhouse gas (GHG) emissions, climate change mitigation, board diversity and inclusion, and human rights.

The report revealed climate change and climate-related concerns remain top of mind for responsible investors, who also believe it will be the greatest driver for RI growth over the next two years, followed by investor demand. 

As the RI industry matures, expectations for future industry growth are moderating, but growth expectations remain strong overall, with 90% of respondents anticipating moderate to high levels of growth over the next two years. 

In the survey, 77 asset managers and 13 asset owners were asked what deters growth in RI. Mistrust or concerns about greenwashing ranked first, while a lack of standardized ESG disclosure frameworks/standards, and the lack of reliable data, ranked second and third respectively.

“Respondents are indicating greater confidence that initiatives such as the strengthening of sustainability disclosure requirements and increasing standardization of sustainability data will be a strong driver for the RI industry going forward,” RIA said in the report, based both on a survey commissioned to Environics Research, and conducted online earlier this year, as well as desk research completed by the RIA. Respondents were invited from a database of 390 organizations, including investment managers, Canadian asset owners including pension funds and foundations, and other institutional investors.

Online surveys can’t be assigned a margin of error because they don’t randomly sample the population.

Maddie Johnson

Maddie is a freelance writer and editor who has been reporting for Advisor.ca since 2019.