Responsible investments that incorporate environmental, social and governance factors now represent 61.8% of professionally managed assets in Canada.
TORONTO – November 26, 2020 – The 2020 Canadian Responsible Investment Trends Report reveals that responsible investment (RI) continues to grow rapidly in Canada. The biennial report, released today by Canada’s Responsible Investment Association (RIA), tracks the scale, trends, and outlook for responsible investment, which refers to investments that incorporate environmental, social and corporate governance (ESG) issues into the selection and management of investments.
According to the latest available data, RI assets grew from $2.1 trillion at the end of 2017 to $3.2 trillion as at December 31st, 2019. This represents a 48% increase in RI assets under management (AUM) over two years. These figures reflect assets that fall into seven different RI strategies or categories including ESG integration, shareholder engagement, negative screening, norms-based screening, positive screening, thematic ESG investing, and impact investing.
Responsible investing now accounts for 61.8% of Canadian AUM, up from 50.6% two years earlier. Retail RI mutual fund assets increased from $11.1 billion to $15.1 billion, up 36% over two years. This growing market share shows that Canadian investors increasingly view ESG factors as important components of investment decisions, with an overwhelming majority of 97% of respondents expecting moderate to high levels of growth in RI over the next two years.
“This research confirms that responsible investment is not a trend; it’s a paradigm shift,” said Dustyn Lanz, CEO of the RIA. “The investment industry is undergoing a secular transformation, stewarding assets towards more sustainable and inclusive outcomes for society while protecting long-term shareholder value.” He added, “For asset managers and financial advisors, RI expertise is no longer ‘a nice to have’; it’s table stakes.”
“Asset managers are hearing loud and clear that Canadians want to make a difference through their investments, with ‘investor demand for ESG/impact’ predicted to be the top driver of RI over the next two years,” said Frederick M. Pinto, Senior Vice President and Head of Asset Management for NEI Investments. “NEI is committed to helping guide the industry toward a greater focus on active ownership and impact solutions to help meet that demand.”
Key Highlights
- $3.2 trillion in RI assets under management (AUM).
- 48% growth in RI AUM over a two-year period.
- RI represents 61.8% of Canada’s investment industry, up from 50.6% two years ago.
- Retail RI mutual fund assets increased from $11.1 billion to $15.1 billion, up 36% over two years. RI ETF assets more than doubled from $240.6 million to $654.9 million during the same period.
- The two most prominent RI strategies by AUM are: (1) ESG integration and (2) shareholder engagement.
- The ESG frameworks most often used by survey respondents in their investment analysis are: (1) Task Force on Climate-related Financial Disclosures (TCFD); (2) United Nations’ Sustainable Development Goals (SDGs); and (3) Sustainability Accounting Standards Board (SASB).
- Survey respondents reported the top four reasons for considering ESG factors are: (1) minimizing risk over time, (2) improving returns over time, (3) fulfilling fiduciary duty, and (4) fulfilling mission, purpose or values.
- 97% of respondents expect moderate to high levels of growth in RI over the next two years.
About the Canadian RI Trends Report
The RIA publishes the Canadian Responsible Investment Report on a biennial basis to understand and assess the characteristics of responsible investment in Canada. Researchers collected survey data from more than 100 asset managers, asset owners, and publicly-available sources. This primary data was supplemented by publicly-available sources such as annual reports. The researchers avoided double counting by subtracting approximately $638 billion in RI assets which overlapped between external managers and funds of funds. All figures are stated in Canadian dollars as at December 31st, 2019. The 2020 report was generously sponsored by NEI Investments.
About the Responsible Investment Association (RIA)
The RIA is Canada’s industry association for responsible investment. The RIA’s membership includes asset managers, asset owners, advisors, and service providers who support its mandate of promoting responsible investment in Canada’s retail and institutional markets. RIA members collectively manage more than $20 trillion in assets. Learn more at www.riacanada.ca.
Contact
Nick Buccheri
Director, Operations
Responsible Investment Association
+1 416-461-6042
In the Global Equity Balanced fund class, more than 78% of the RI funds outperformed their average asset class return over the quarter and a similar proportion outperformed their average asset class return for the one- year period. A vast majority of the RI funds outperformed over the three-year, five-year and 10-year periods covered in this report.
In the Canadian Equity Balanced fund class, all of the RI funds outperformed their average asset class return in the third quarter of 2020, and a majority of the RI funds outperformed their average asset class return over the one-year period. More than 80% of the RI funds outperformed their average asset class return in the five-year and ten-year periods ending September 30, 2020.
In the Canadian Fixed Income Balanced fund class, the vast majority of the RI funds outperformed their average asset class return over the three-month, one-year, three-year and five-year periods ending September 30, 2020.
