How can RI support a fairer recovery?

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The economy has been hard-hit. Will the focus now be on a fast recovery or a different kind of recovery?

The situation calls for reflecting on responsible investing (RI). Canada, along with the rest of the world, isn’t just in the midst of economic upheaval — it’s in the midst of a broader shake-up. Environmental, social, and governance (ESG) factors are at the forefront.

We see the concerns about how we treat the planet, run our organizations, and care for our employees — and how companies engage with their communities. All of these are elements of ESG, which RI takes into account.

These criteria tell us a lot about how a company operates, what it values, and how it leads. All that can have a material impact on its performance.

RI isn’t just about protecting resources; it’s about managing issues that can have a negative impact on investments. One reason why many institutional investors started to incorporate ESG criteria was to better manage risks.

As we’ve seen from the current pandemic, we can’t always predict a crisis. But we can be prepared for one. Companies with solid ESG practices were better equipped to face the COVID-19 pandemic, and their risk management helped weather market volatility.

Investors are looking at how organizations have reacted to the pandemic. How have companies dealt with, and responded to, their stakeholders such as their employees and suppliers? How have they adjusted to what’s happening in the most effective and positive ways? These are critical questions.

We often hear that a post-COVID-19 world should be more inclusive and should strive for the greater good. RI has been championing that for years, by focusing on companies that take ESG issues to heart.

A fairer recovery will feature companies that don’t exist in a bubble, isolated from the world around them. We believe the companies that will succeed will be the ones that are not only fundamentally sound but also mindful of their impact.

Any crisis is an opportunity to examine what matters to you. That’s true for individuals and companies. Sometimes you shift your priorities, and other times you recommit to them.

As the economy recovers, advisors can convey to clients how RI may bolster the recovery of their own finances. This is a time to reassure clients that ESG and financial performance can go hand in hand.

With RI, investors are in a position to reach their long-term objectives and meet their personal interests. The companies you’re betting on remain committed to high ESG standards, often act as model corporate citizens, and are well positioned for the rebound.

An RI approach can contribute to a recovery that works for all of us, and to a fairer and more sustainable future.

Deborah Debas