The Responsible Investment Association (RIA) and Environics Research have released the most recent responsible investment trends report, the 2023 Canadian Responsible Investment (RI) Trends Report. In it, researchers discuss the results of their interviews with 61 asset managers and 34 asset owners, alongside research on 30 additional organizations, showing that responsible investments make up 49 per cent of all assets under management in Canada.
RI is identified as those investments made which incorporate the consideration of environmental, social and governance (ESG) issues in the selection and management processes.
The report’s authors say this year’s data showed a marked increase in investor confidence about ESG reporting. “With greater sophistication around RI leading to increased scrutiny and higher expectations, investors eagerly await globally consistent definitions, standards and frameworks,” they state. “This will provide the common language and comparability needed to boost confidence and address persisting concerns about greenwashing, disclosure and data integrity.”
They add that consideration of ESG factors is motivated by a desire to minimize risk and improve returns, followed by a desire to fulfill fiduciary obligations. Greenhouse gas emissions are reportedly the most common ESG factor considered, followed by board diversity and inclusion and climate change mitigation.
Top three deterrents to RI growth, according to respondents, continue to be greenwashing, lack of standardized disclosure frameworks and lack of reliable data. “Growth in RI is being driven by climate change, investor demand for ESG and regulatory guidance and requirements.”
In the report’s forward, Patricia Fletcher, CEO of the RIA says uptake of credible and consolidated standards will determine the future potential of RI. She adds that Canadian standards remain in limbo.
“We are also calling on regulators and policymakers to act decisively to standardize data, definitions and disclosure,” she writes. More than 29 per cent of respondents said the absence of standards was their top concern; 72 per cent are currently using either the Taskforce on Climate-related Financial Disclosures (TFCD) or the Sustainability Accounting Standards Board (SASB) frameworks to make investment decisions – 51 per cent report using both.
The report also examines asset allocation by RI strategy (corporate engagement, negative screening, thematic investing and ESG integration), policies and practices, reporting confidence, business practices and other future challenges.