Going Global with SRI
Insight As socially responsible companies and business continue to grow and stand out in society, investments in companies who meet ESG standards increases.
More and more investors are recognizing that in today’s complex market environment, achieving attractive equity returns requires a global approach. For Canadian investors, this presents an opportunity many times the size of our domestic stock market. Of note, Canadian stocks account for only about three percent of the world’s equity opportunities.1By exploring regions beyond our borders, you can increase your portfolio’s diversification and enhance its return potential.
But can you take a global approach while still maintaining your commitment to socially responsible investing (SRI)? “You absolutely can,” says Dermot Foley, Portfolio Manager for Vancity Investment Management Ltd. (VCIM) and sub-advisor for iA Clarington’s Inhance suite of SRI funds, which includes the fossil fuel-free IA Clarington Inhance Global Equity SRI Class. “We bring to global equities the same commitment to SRI that drives our domestically focused solutions.”
Foley believes a key feature of a genuine commitment to SRI is an investment process driven by environmental, social, and governance (ESG) analysis. “When we’re evaluating global equities, we screen out companies that fail to meet our stringent ESG standards,” he explains. This includes companies whose primary line of business includes tobacco, nuclear power, military weapons, adult entertainment, and gambling.
It’s not just a question of eliminating companies that don’t meet VCIM’s ESG criteria, says Foley. “We actively seek out companies — all over the world — that demonstrate a progressive ESG agenda, such as companies developing new technologies that improve environmental sustainability.”
A company may tick all the ESG boxes, but that’s only part of the equation, notes Andrew Simpson, Portfolio Manager at VCIM. “We aim to deliver attractive returns, so for a company to make it into our funds, it also has to have all the purely financial attributes that a traditional stock picker is looking for — a strong balance sheet, an established competitive advantage, and an excellent management team, to name a few.”
If a company in the portfolio begins to exhibit sub-par ESG performance, VCIM leverages the fund’s status as shareholder to engage with company management, either one-on-one or in concert with other shareholders or stakeholders.
Foley concludes that investors seeking a global equity solution with a deep commitment to SRI would do well to start with the prospectus — a legally binding document for the fund manager. “We believe a portfolio manager should be willing to codify his or her commitment to SRI in the prospectus,” he says. “If someone is unwilling to talk the talk, they almost certainly won’t walk the walk.”
IA Clarington Inhance Global Equity SRI Class, managed by sub-advisor Vancity Investment Management Ltd., offers Canadian investors socially responsible access to the global equity landscape. For more information, speak with your financial advisor today.
1The World Bank, as at December 31, 2017 (https://data.worldbank.org/indicator/CM.MKT.LCAP.CD).
The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decision. Statements by Vancity Investment Management Ltd. represent their professional opinion, do not necessarily reflect the views of iA Clarington, and should not be relied upon for any other purpose. Information presented should not be considered a recommendation to buy or sell a particular security. Unless otherwise stated, the source for information provided is the portfolio manager. Statements that pertain to the future represent the portfolio manager’s current view regarding future events.
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