Veteran portfolio manager highlights importance of designations, certified ESG products, and shareholders’ role
The momentum that carried responsible investment (RI) assets to new highs in 2019 is set to carry over into 2020 in Canada, particularly as retail investors express greater interest in creating RI portfolios. But even with increased demand and interest, a lot of changes are still needed — and a long-time professional in the space has some ideas.
“There are different avenues available for advisors to brush up on responsible investing, including academic institutions that offer practicums and institutions that have programs for RI certification,” said Patti Dolan, portfolio manager at Mission Wealth Advisors with Raymond James. “Those are a great place to start.”
In the second part of her interview with Wealth Professional, Dolan noted that the Responsible Investment Association (RIA) offers three different types of designations online. Having taken all three herself, she vouches for the quality of the information provided and the coursework that students are taken through.
“It’s a CFA-level course, so it’s not a Mickey Mouse type of program,” she said. “You get to work on spreadsheets where you input potential environmental issues, for example, such as a carbon tax, and see how it would flow through a certain financial analysis. It’s very practical work.”
Those who want continuing-education credits may also consider a program offered by the Canadian Securities Institute, Dolan said, though she considers it to be very introductory in scope. A number of universities offer free-to-attend lectures, including the University of Calgary, which she praised for having excellent speakers on issues like climate change, reconciliation with the indigenous community, and concerns surrounding governance.
Such knowledge has been useful for her not just to raise her credibility among clients, but also in her efforts at fostering shareholder engagement. “I invest in a couple of oil and gas companies, but I’m also a member of the Shareholder Association for Research and Education (SHARE),” Dolan said. SHARE is a leading not-for-profit organization that helps member institutional investors become active owners, as well as develop and implement RI policies and practices.
“Some of the areas we’re working on are climate risk, corporate governance, human rights issues that have been uncovered in some supply chains, reconciliation with the indigenous community, and water usage,” she said. “As a group, we vote our proxies to advance resolutions urging companies to do better; I’d say they’re doing good with respect to 95% of their activities, but there’s maybe 5% that needs fixing.”
Their efforts at engagement are usually well-received and can effectively influence change at companies, Dolan said, adding that her clients greatly appreciate stories that show how their money is used in line with their values. It’s a message that’s resonating more strongly across the investment industry, as exemplified by BlackRock’s recent commitment to join a global coalition of investors against climate change.
“That’s pretty powerful for a retail investor to be able to have that kind of access,” she said. “I talk to them about the ratios and ROI in their portfolio, which are excellent, and their eyes kind of glaze over. But letting them know about what a company is doing good or bad in a community, and how it’s getting fixed — that gets them excited.”
Aside from better education and awareness among industry professionals, Dolan would like to see a more supportive environment for investors to make the right RI decisions. Simply updating new client account forms to ask if they would like their investments to be screened with ESG issues, she said, would go a long way towards opening valuable conversations and compelling advisors to focus more on that area.
“The RIA is also looking at certifying mutual funds and investment products that are authentic and not just greenwashed strategies,” she said. “There’s been a couple of cases in the States of ETFs that said they were screening for certain criteria, but some of their investments actually aren’t aligned with what they’re saying.”
That highlights how critical it is to look under the hoods of investment products, especially as there is still a lack of standardization even across ESG strategies and indexes that focus on the same problem. In other words, transparency is going to be more important than ever for portfolio managers and other investment professionals committed to RI.
“What I’m seeing right now within Raymond James, and what I’m really excited about, is how our analysts are starting to reference ESG issues and flag them as risk factors,” Dolan said. “I think that just shows how we’re at a point where RI is going to be very much mainstream.”