Table of Contents
- Investors are now factoring ESG into their investment decisions. [Jump to this section]
- Recent events have further driven the popularity of ESG investing. [Jump to this section]
- Climate change is taking priority. [Jump to this section]
- ESG investments are outperforming the S&P/TSX Composite index. [Jump to this section]
- The ESG components of Skyline’s investment funds have directly benefited investors. [Jump to this section]
Responsible investing (RI), Socially Responsible Investing (SRI) and Environmental, Social, Governance (ESG) have become popular terms in the investment world, as more investment managers are factoring social responsibility and sustainability into their investment decision-making1. As more companies take ESG into account, and a greater number of investors seek ethical and responsible investment products, there will likely be room for differentiated ESG investment strategies5.
As more individuals, companies, and pensions divest from companies, products, and services that are deemed environmentally harmful or unethical, investors are beginning to proactively seek funds that align with their values.5
What do “responsible investing” and “ESG” mean?
Responsible investing, or sometimes Socially Responsible Investing (SRI), is a method where investors choose to place their money in products, companies, or initiatives that they believe will bring about positive social or environmental change. Some investors practice this method by avoiding certain types of industries or products that they feel do not align with their personal belief systems, such as oil or tobacco.
Environmental, Social, Governance, or ESG, is a term that encompasses the key factors of responsible and sustainable business practices. Integrating ESG principles into investment analysis and decision-making is the most prominent way Canadian asset managers implement a responsible investing strategy. 1
More than just a fad: sustainability is here to stay
The ESG space continues to grow, with a 48% increase in Assets Under Management (AUM) of ESG funds between 2018 to 2020 alone, putting the overall responsible investment class in Canada at a $3.2 trillion market cap.2
To meet this growing demand, companies and investment issuers are increasing their reporting on ESG fundamentals. As of August 31, 2021, 71% of the companies listed on the S&P/TSX Composite Index released reports on ESG topics, compared to only 58% the previous year,3 highlighting the importance of these topics in making prudent investment decisions. As Canada digs into an economic recovery phase, many institutional investors believe investing in ethical and ESG-based investments and companies is more important than ever before.4 The events of the past nineteen months have demonstrated the interconnectivity of markets and supply chains—and how quickly adverse environmental or health events can upset the flow of goods and services.5 These events have not only helped drive an increased focus on social and environmental issues, but have also highlighted the financial system’s potential influence and how investors can participate in tangible ways.4,5
In short, investors are now looking for investment methods that not only benefit themselves but also provide larger socio-economic benefits outside of their direct portfolio.
Climate (and clean energy) is king
Investors on a global scale continue to highlight climate change and environmental conservation as a priority ESG issue.4,6,7 Affordable and efficient clean energy production, as well as social issues, such as diversity and inclusion, are the next most prioritized ESG areas, according to market feedback.4,7,8
Making green while going green
Investing in environmentally or socially driven change is no longer just about doing good while forgoing attractive returns. Among the key components behind companies moving into ESG investments is to lower risk and/or enhancement of returns. 10,15
In recent years Canadian Portfolio Managers and Investment Fund Managers have seen a transition from investing into ESG investments out of a sense of fiduciary duty, to investors actively seeking new opportunities to bolster portfolio returns.11
ESG integration – a holistic business decision
Companies who internalize ESG principles into their decision-making are often rewarded with lower cost of capital, less vulnerability to systemic market risks, and competitive advantage over their peers through better management of resources, human capital, and overall operational risks.14 When a company integrates ESG factors into their daily business decisions, they consider each of their audiences and stakeholders: the communities in which they do business, the clientele they serve, the staff they employ, and more.
Skyline Wealth, and each of the four funds we offer, are housed within Skyline Group of Companies (“Skyline”), which applies an ESG approach in all facets of its business.
Skyline’s numerous environmental, social, and governance initiatives not only benefit business operations in a positive way but also flows through to create benefits for Skyline Wealth investors.
For example, our Skyline Living R.I.S.E. Tenant Assistance Program has saved hundreds of tenancies at properties within our Skyline Apartment REIT, thereby mitigating against potential high vacancy in Skyline Apartment REIT portfolio, even in turbulent times.
Additionally, many of our Skyline Commercial REIT and Skyline Retail REIT properties feature rooftop solar installations, lowering operating costs and creating an additional revenue stream for those REITs. Last but not least, Skyline Clean Energy Fund, made up of solar and biogas assets that produce clean energy under long-term government contracts. With renewable energy infrastructure comprising its portfolio, Skyline Clean Energy Fund aims to help Canada accelerate the creation and consumption of clean energy.
As part of Skyline Group of Companies, and as a dealer that offers four investment products with ESG components, we at Skyline Wealth stand firmly in the belief that doing what’s right benefits all of us today and especially tomorrow.
Vice President, Wealth Solutions
Ray Punn is an experienced leader in management across the public and private sectors, including the Financial, Automotive, and Private Equity industries. As Vice President of Skyline Wealth, he leads a comprehensive team of Advisors, and oversees business operations, marketing, investment management, and investor relations. With a deep understanding of how each component of wealth management contributes to an exceptional investor experience, Ray and his teams focus on building long-term partnerships with Skyline Wealth’s valued investors.
1 “2020 Canadian RI Trends Report.” Pages 6 & 8. Responsible Investment Association, https://www.riacanada.ca/research/2020-canadian-ri-trends-report/. Accessed 26 October, 2021.
2 “2020 Canadian RI Trends Report.” Page 5. Responsible Investment Association, https://www.riacanada.ca/research/2020-canadian-ri-trends-report/. Accessed 26 October, 2021.
3 “Millani’s 5th Annual ESG Disclosure Study: A Canadian Perspective.” Page 2. Millani, https://www.tsx.com/resource/en/2722. Accessed 2 November 2021.
4 “ESG Sentiment Study of Canadian Institutional Investors.” Page 3. Millani, https://c3a4c62d-4602-4b4f-a312-c6c7a40c2d99.filesusr.com/ugd/66e92b_a20312ddc33e4cad9e6b774e08bc9efe.pdf. Accessed 2 November 2021.
5 “Why interest in ESG investing is set to explode.” BNNBloomberg.ca, https://www.bnnbloomberg.ca/why-interest-in-esg-investing-is-set-to-explode-1.1567634. Accessed 2 November 2021.
6 ”The US SIF Foundation’s Biennial ‘Trends Report’ Finds That Sustainable Investing Assets Reach $17.1 Trillion.” USSIF.Org, https://www.ussif.org/blog_home.asp?Display=155. Accessed 2 November 2021.
7 “Sustainability Goes Mainstream: 2020 Global Sustainable Investing Survey.” Blackrock, https://www.blackrock.com/corporate/literature/publication/blackrock-sustainability-survey.pdf. Accessed 2 November 2021.
8 “2020 Canadian RI Trends Report.” Page 12. Responsible Investment Association, https://www.riacanada.ca/research/2020-canadian-ri-trends-report/. Accessed 2 November, 2021.
9 “2020 Investment Funds Report.” Page 16. The Investment Funds Institute of Canada, https://www.ific.ca/wp-content/themes/ific-new/util/downloads_new.php?id=26009&lang=en_CA. Accessed 2 November 2021.
10 ”ESG Integration in Canada.” Page 13. CFA Institute, https://www.cfainstitute.org/-/media/documents/article/position-paper/cfa-esg-integration-canada-web-3pp.ashx. Accessed 2 November 2021.
11 “2020 Canadian RI Trends Report.” Page 11. Responsible Investment Association, https://www.riacanada.ca/research/2020-canadian-ri-trends-report/. Accessed 2 November, 2021.
12 S&P/TSX Composite Index. Money.TMX.com, https://money.tmx.com/en/quote/%5ETSX. Accessed 2 November 2021.
13 Willis, Andrew. “Have ESG Stocks Paid Off?” Morningstar, https://www.morningstar.ca/ca/news/215413/have-esg-stocks-paid-off.aspx. Accessed 2 November 2021.
14 Lodh, Ashish. “ESG and the cost of capital.” MSCI, https://www.msci.com/www/blog-posts/esg-and-the-cost-of-capital/01726513589
15 “2020 Canadian RI Trends Report.” Page 12. Responsible Investment Association, https://www.riacanada.ca/research/2020-canadian-ri-trends-report/. Accessed 2 November, 2021.