Environmental, social and corporate governance is becoming an increasingly attractive area of investment in Canada and around the world. Using your money to change the world for the better brings its own ethical benefits of course, but firms with high ESG standards are now producing higher returns with greater regularity, too.
is the founder of BC-based Genus Capital Management, a firm where ESG investing has become a major part of its business. Canada’s over-reliance on the oil industry has been a common criticism of the economy here, and now many investors are making the switch away from fossil fuels. Genus’ CEO outlines just why his firm decided to go green.
“We have been managing ESG money for over 22 years,” he says. “About six years ago our clients came to us and said they wanted to start divesting from energy, particularly oil sands. It was a gradual process, but over the course of three years we gradually divested from all companies in the oil, coal and gas space.”
That move was step one, but simply divesting isn’t much of a strategy taken in isolation. Thus, Genus moved to create a fund specifically for investing in renewables.
“Two years ago at the behest of our clients we started to look for something more positive apart from just divesting,” says Wachell. “We created our Fossil-Free High Impact Equity Fund. The whole idea is that if you divest in fossil fuels you should also invest in renewables – companies like Tesla, Solar City, Vestas.”
These disruptive companies are still in their formative stages. This usually means returns aren’t spectacular at present, although the potential for high yields in the future is massive.
“A lot of these companies are emerging, so they are still working on their business models,” says Wachell. “Tesla is a case in point; it has had some stops and starts and is still working on its production process. That’s where analysts come into play. You have to look at the financial side of the equation, as well as the mission statement side.”
The emergence of these companies show that a corner has clearly been turned when it comes to renewables. Mass production will be the next step, and Tesla is already moving in that direction as it aims to make the electric car a ubiquitous presence on our roads.
“These disruptive companies are filling a need because older companies are not getting the job done,” says Wachell. “It isn’t good for the incumbents, GM or Ford, but it is good for consumers and the rest of the world. If you look at Tesla’s new model and the planned ramp-up, it is almost modelling what happened with the Ford Model-T. So that’s interesting.”