SPECIAL REPORT: ESG Investing

Coming up next week, we examine the role of environmental, social and governance screens in investing, and give you tips and ideas to make your portfolio responsible!

Ruth Saldanha 20 September, 2019 | 2:00PM

Climate Protests

Sustainable investing is here to stay. Environmental, social and governance factors play an increasingly important role in most investors’ portfolios, and Morningstar's research finds that most investors, across ages and genders, have a clear preference for sustainable investing. Moreover, research finds that responsible companies tend to outperform. So investors don’t need to give up alpha to invest responsibly.

Once we establish that sustainability is the way forward, it makes sense to dive a little bit deeper into the idea. E, S and G may be talked about equally, but governance is the most important of the pillars as it applies to all companies. Oftentimes, it also is the easiest to understand. “Governance factors really play a role across all companies in all industries, whereas the social and environmental factors may be more material in some industries than others. Governance is important across the board,” says Jon Hale, Morningstar’s head of sustainability research.

Which isn’t to say the other two pillars don’t matter. Environment is increasingly important, not just in investing, but in our very survival. Our planet is on fire. In some cases, like the Amazon forests, quite literally. And Canada, surprisingly, isn’t doing as much as it should to combat the effects of climate change. The Morningstar Sustainability Atlas finds that we fare poorly in sustainability. This isn’t new. We’ve talked about how we’re already past the point of mitigation in climate change. It is so important, that climate is likely to be one of the main deciding points in the Canadian federal elections next month. And while climate change is indeed a key issue, we shouldn't overlook other environmental risks like biodiversity loss, and water insecurity. If we do, we'll miss a huge economic opportunity.

And what of ‘Social’? One of the reasons that Canadian companies fares so poorly on sustainability is because of the controversies around indigenous rights, lending to defense companies, and gender diversity. Still, some small steps have been made, for example, with shareholders recently voting for gender diversity at Ontario-based Waste Connections (WCN).

What does all of this mean for investors? We will examine questions around ESG investing in detail over this week. Here’s what you can expect:

Monday

Is Canada ready for climate change?
Canada is a commodity heavy economy – how can we thrive in a low carbon future?

5 sustainable funds for outperformance
These funds have the highest Morningstar Sustainability Rating, as well as the highest Morningstar Quantitative Rating of ‘Gold’

How important is sustainability to an equity portfolio?
Blackrock’s ESG expert Hail Yang discusses why ESG investing is critical for future success


Tuesday

Should your ESG portfolio be active or passive?
Automation and efficiency vs. obstacles and opportunities lost

The impact of opioid litigation on pharmaceutical stocks
Is it a case of too little, too late? And what does it mean for Canadian investors?

3 myths about sustainable funds
Sustainable funds perform on par with traditional funds, cost about the same, and offer plenty of choice


Wednesday

Can your fixed income portfolio be ESG positive?
Gold-rated fund manager Susan McNamara of Beutel Goodman talks about ESG investing in fixed income

EMs and ESG: Mutually exclusive?
Investing and then using investor status to engage companies to improve ESG can be a direct and effective way to create impact in EMs

Four sustainable stocks to make your portfolio ‘responsible’
These names rank high on ESG parameters, can grow profit, and are trading at a discount!


Thursday

Is cannabis ESG positive or negative?
We examine whether the new industry is an alternative to opioids, or a sin stock

Shareholder climate engagement at all-time high
The number of resolutions and the increasing levels of support reflect shareholders' growing concerns about the climate-resilience of their portfolios


Friday

Is religious investing the same as responsible investing?
Yes and no, though oftentimes the screens overlap

Are ‘Green Bonds’ green?
Beware 'Greenwashing', a practice that makes a bond appear green when it really isn't

About Author

Ruth Saldanha

Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca