Tracy Price of the Tracy Price Wealth Management Team is an accredited discretionary investment manager, a Certified Responsible Investment Advisor (RIAC) and an active member of the Responsible Investment Association of Canada (RIA). Our investment approach has evolved to fully integrate environmental, social and governance (ESG) factors into our research process.
- We are long-term investors with a strong corporate culture, code of ethics, and sense of community.
- Responsible Investing fits extremely well into our Team’s sense of core values. We derive great comfort and satisfaction from being able to combine our personal beliefs with our professional investment process.
What is Responsible Investing?
Responsible investment (RI) refers to the integration of environmental, social, and governance (ESG) criteria into the selection and management of investments. There is growing evidence that RI reduces risk and leads to superior long-term financial returns.
Responsible investing has changed. It isn’t just about my values or your values anymore, it is also about making better, more informed investment decisions. It’s about managing risk to long-term shareholder and stakeholder value. In a world where climate change, water scarcity and global supply chain issues dominate the business pages, we strongly believe that conventional investment analysis and selection that does not consider these issues are ignoring important information that can have negative impacts on society and your investment returns.
Responsible investors know that the integration of ESG factors into the selection and management of investments can provide superior risk-adjusted returns and positive societal impact. What’s changed in the past decade is that it’s evolved to become a mainstream function of good investment practice, resulting in better, more informed investment decisions.
We need to know how the companies that we invest in are managing the future: ESG analysis gives us a bigger and clearer window into their operations and the quality of their management. To us it is just common sense.
There’s a growing consensus among institutional investors that accurate valuations and proper risk management require greater disclosure and consideration of ESG issues.
The goal is to encourage responsible, long-term approaches to investment. The money management world is growing to understand the link between profitability and responsibility.
With a growing body of evidence that ESG considerations have an impact on the financial performance of securities, RI has evolved from just screening out companies that we don’t like to integrating environmental, social and governance or ESG criteria into the selection and management of investments.
There is a growing body of evidence showing that consideration of Responsible Investing criteria and processes meets and often exceeds the performance of traditional investments and has a positive societal impact. Investors don’t have to choose one over the other.
Comparisons of RI versus traditional investment returns points to better long-term risk adjusted returns when environmental, social and governance issues are taken into account.
How is ESG analysis incorporated into our investment process?
- We prefer to invest in companies that we believe have sustainable business models and good long term growth prospects.We attempt to consider all material factors in assessing the merits of an investment.
- We recognize that these issues can be potentially significant factors in some companies’ long-term prospects for success. Considering these issues is therefore an important element of our investment research and analysis.
- With the support of analytical tools, such as Sustainalytics (sustainalytics.com), we apply an environmental, social and governance (ESG) scoring system to find “best in class” companies in Canada and the U.S. Then, we identify weaker constituents and replace them with those that are doing a better job on ESG issues.
- The significance of ESG factors will vary depending on the company and its’ industry. For example, a mining and metals sector analysis will focus on employee safety and environmental impact as significant ESG themes for companies in that sector. A banking analysis meanwhile is more likely to ask companies about remuneration and diversity.
- In addition, we are continually looking for specialized RI portfolio managers who allocate funds to companies that are proactively working to solve ESG problems. Here, our objective is not just to remove offenders, but also put our support behind organizations that are actively doing good. Today, many industries are striving to meet growing demands for new and alternative enviro-friendly technologies and solutions. This creates exciting opportunities for investors.
Our commitment to our clients has always been to continue to look for new and better ways to manage their hard earned Wealth. This is a natural evolution of that commitment and process and one that we are very excited about.
Examples of Environmental, Social and Governance (ESG) Issues
Human and Labour Rights:
In 2013 the tragic collapse of a garment factory in Bangladesh attracted worldwide attention. The deaths of more than 1,100 garment workers show how a company’s business decisions can have serious consequences for workers.
Climate change is more than just an environmental issue; it’s a business issue as well. Extreme weather, rising sea levels, droughts and other climate-related events can disrupt markets and erode the long-term profitability of companies.
The Earth’s supply of freshwater is limited and the demands upon it are increasing. Water is an important issue to investors because companies that don’t manage their exposure to water risks can face business interruptions or reputational risks if a local community’s water is affected.
Corporate boards should reflect the diversity of their workforce and society. For example, there is compelling evidence showing that the presence of women on boards can improve financial performance.
Executive compensation has grown at a much faster rate than wages paid to the average Canadian worker. This can contribute to social inequality.
These are just a few of the issues considered by responsible investors.