Poll reveals unique Canadian view on green investment along with growing focus on social issues
In a survey conducted by Millani in April last year, three fourths of participating Canadian institutional investors correctly predicted that the COVID-19 pandemic would positively impact the ESG movement. But while they were right about the trend’s direction, they were still unprepared for its velocity.
According to a new study by Millani, which draws from a follow-up survey conducted in December, 93% of Canadian institutional investors were surprised at the degree to which market sentiment had advanced around ESG issues in the previous nine months, as well as the short duration between the market’s decline and its recovery.
As assets managed in sustainable funds surged both in Canada and across the world, investors said that they have moved from “pushing” ESG products and strategies to being in a “pull stage” where they react to market demand. Aside from ESG advancements in regulatory and disclosure requirements, investors are facing greater pressure from asset owners as well as greater public interest in social issues.
Between December and April, ESG remained top of mind for investors, with 81% in the most recent survey saying that it would be in their top three priorities for engagement in 2021; 56% identified it as their topmost priority, with the Taskforce on Climate-related Financial Disclosures as the preferred framework of reference for investors and issuers alike.
However, Millani found Canadian investors held the unique sentiment that the issue wasn’t just about climate change, but also about how Canada can transition into a lower-carbon economy.
Looking toward social issues, 75% of respondents highlighted diversity and inclusion as a key engagement issue in 2021, which will be supported by broader diversity disclosure requirements from the Canada Business Corporations Act. Investors in Canada are set to have more access than ever to data concerning board and senior management-level representation of women, visible minorities, First Nations, and those with disabilities.
Aside from simple disclosures on employee numbers, issuers are now required to provide a description of their human capital resource management strategies, including metrics on initiatives centred on diversity, culture, health and safety, and skills development. Labour relations along with employee health and wellness were also highlighted as issues that investors have developed a heightened sensitivity toward.
And for 75% of respondents in the survey, there’s no question that mandatory ESG disclosures will come in. What remained uncertain, however, was when it would happen; few predicted it would happen this year, but agreed that there would be movements toward that point in 2021.
Not all disclosure initiatives are being embraced unquestionably. Commenting on the updated reporting structure released by the United Nations Principles of Responsible Investment in late 2020, some investors asked how “real-world outcomes” meshed within their fiduciary duty, particularly as they built their ESG integration strategies around generating the best financial returns for their clients, above any other reason.