Finally, Canadian advisors can get a designation in responsible investing. It’s no surprise that this new certificate comes from Deb Abbey
, the heart and soul of RI in Canada
Deb Abbey’s approach to the investment advisor business has always been a bit against the grain. Perhaps that’s because in a previous career, Abbey was the project director for the David Suzuki foundation. “While I was there I developed an interest in investing capital to the benefit of shareholders and stakeholders,” she explains. Her interest in looking at shareholder and stakeholder value with a broader lens would lead Abbey down a new career path as a socially responsible financial investment advisor. She went on to become an expert in the field and is now the CEO of the Responsible Investment Association. Her knowledge and passion has helped shape the responsible investing industry in Canada today. What began as a fringe investment strategy has become one of the world’s fastest growing investment categories, with approximately $600 billion in RI assets in Canada. “It’s not just about my values and your values anymore,” says Abbey. “It is about managing risk to shareholder and stakeholder values. Companies don’t operate in a vacuum.”
When Abbey left the David Suzuki foundation in the mid-90s and obtained the requirements she needed to become a financial advisor, it was a time, she says, when, “hotshot CEOs” would come in to a company, strip out middle management and focus solely on bottom line profitability. At the same time, issues such as climate change, water scarcity and the global supply chain were starting to dominate the business pages. “I found it quite fascinating and wondered if there was an approach to investing that really looked at the long term,” recalls Abbey. She was hired at Wood Gundy in 1995 and around the same time she attended a social investment conference in Vancouver. There she met a man by the name of Michael Jantzi, who was providing environmental, social and governance (ESG) research on the TSE 300 companies. (Jantzi Research is now Sustainalytics, a leading global provider ESG investment research and analysis.) “I used that research to really screen out the laggards and identify the leaders in the portfolios that I was recommending to the clients.” Within about five years Abbey was managing assets for a number of different charities and other organizations. In 2000 she decided to strike out on her own, and launched Real Assets Investment Management, the first investment management firm in Canada to focus exclusively on socially responsible investment. (Abbey sold that company to VanCity in 2005.)
Today, the term socially responsible investing has been replaced with the more encompassing “Responsible Investing.” “It represents socially responsible investment, ethical investment, sustainable investment, community investment, mission-based investment and more recently, impact investment.” says Abbey. “That term reflects the revolution from just screening out the companies we don’t like to integrating environmental, social and government criteria into the selection and management of all of our investments.” Anyone who thinks these factors don’t matter just needs to look back to the collapse of the Rana Plaza garment factory in April 2013. When news broke that Loblaws’ Joe Fresh clothing was among the brands sewn at the factory, “overnight people were checking the tag in their T-shirts to see if they were wearing Joe Fresh clothes,” says Abbey. “Loblaws did some very responsible things around that incident,” she adds. “Other companies haven’t done as well as far as protecting their own brand.” However, arguably the biggest ESG issue facing companies today is climate change. “We’re finding companies are really having to adapt quickly to address some of the worst impacts of climate change,” says Abbey.
A 2011 Ipsos Reid survey (conducted for Standard Life) showed more than half of Canadians would be interested in responsible investments if their performance was the same or better than the alternative. But at the same time, only 15 per cent said they were knowledgeable about this type of investment. Of those that had spoken with their financial advisors about responsible investments, more than half had brought it up in conversation themselves. “Most investors don’t talk about this to their clients and many clients would like them to,” says Abbey. Abbey says some clients are led to believe that responsible investing means poorer performance, but insists that’s not the case. The Jantzi Social Index, which is made of up 60 Canadian companies that pass a set of environmental, social and governance criteria, has outperformed the TSX by about 28 basis points a year (annualized since inception.)
“Our world is too complex and the tools that investment managers have traditionally used to manage risk simply aren’t up to the job any more. We need to know how these companies are managing the future. It’s just common sense.”
This article is from Wealth Professional Issue #2.4. Download the issue to read more.