Canadian institutional investors are refocusing their policies to be more attentive to ESG risks
When it comes to evaluating companies for investment, Canadian institutional investors no longer see financial metrics as the bottom line.
The Edelman Trust Barometer Special Report: Institutional Investors has found that 91% of Canadian institutional investors have changed their voting and engagement policies to be more attentive to ESG risks, and 65% have done so within the past year.
“This data makes it very clear that issuers can no longer turn a blind eye to environmental and social considerations,” said David Ryan, executive vice president for Corporate and Financial Communications at Edelman. "Canadian institutional investors are measuring companies not only on their financial returns, but also on their contribution to social issues that are shaping business and political environments.”
Efforts to address societal issues have become more valuable among Canadian institutional investors, with 96% stating that it impacts trust in a potential investment. Another 91% of investors said they would even consider investing with a lower rate of return if it meant accommodating sustainable or impact investing considerations. Cybersecurity, globalization, and income inequality were the top three social issues that respondents felt companies need to take a stand on publicly and urgently.
Shareholder activism is also becoming a bigger consideration: 90% said their firms are more interested in taking such an approach to investing, and 95% said they’ll back a reputable activist investor if they feel that change is necessary. However, 90% of Canadian investors believed that most companies aren’t ready for shareholder activism.
The survey also looked at other factors that affect investors’ trust in companies. Unlike US investors that focused on quantifiable performance indicators, Canadian investors assigned greater importance to personal relationships and verbal communications with senior management and the board of directors.
When it comes to investor relations, 87% of Canadian institutional investors said that most companies’ approach to sharing information for IR purposes is outdated. And when evaluating a current or prospective investment, 89% wanted to see more visual ways of sharing information, while 92% wanted more qualitative, forward-looking disclosures.
Digital channels have also become a leading information source in the investor decision process for Canadian investors, with 89% consulting a company or executive’s social media channels in assessing a current or potential investment. Facebook, LinkedIn, and YouTube emerged as the top platforms that Canadian institutional investors check on a weekly basis.