Responsible Investment Trends Report
The Canadian Responsible Investment Association (RIA) released the responsible investment trends report to analyze the development status of responsible investment.
RIA members manage more than $40 trillion in assets. A total of 95 respondents voluntarily participated in the survey, including 61 asset managers and 34 asset owners.
Related Post: US SIF Releases 2022 Sustainable Investing Report
Overview of the Canadian Responsible Investment Market
The total size of the Canadian responsible investment market in 2022 is US$2.9 trillion, down from US$3.0 trillion last year, but the market share of responsible investment has increased from 47% last year to 49%. The decline in AUM has been linked to rising inflation, rising interest rates and recession fears.
On the question of why responsible investment is adopted, 74% of the respondents believe that responsible investment can reduce investment risks, 61% believe that responsible investment can increase investment returns, and 44% believe that responsible investment can fulfill fiduciary responsibilities. In addition, the proportion of respondents pursuing environmental and social impact increased from 20% to 31%.
In terms of specific ESG factors, greenhouse gas emissions (93%), board diversity (87%) and climate change mitigation (84%) are the three topics that respondents are most concerned about. Among them, the concern about greenhouse gas emissions has increased by 8 percentage points from 85% last year, which is the fastest growing rate. This suggests that investors are paying more attention to greenhouse gas emissions in their decision-making, and they are also setting more greenhouse gas emissions targets for their investment portfolios.
Asset Allocation of Seven Responsible Investment Strategies
According to the classification of responsible investment by the Global Sustainable Investment Alliance (GSIA), RIA classifies the allocation of seven responsible investment strategies. The seven types of responsible investment strategies are: ESG Integration, Corporate Engagement, Negative Screening, Thematic Investment, Positive Screening, and Impact Investing and Norms-based Screening.
Among the seven types of responsible investment, respondents used ESG Integration, Corporate Engagement and Negative Screening the most, reaching 94%, 82% and 80% respectively. The asset proportions of these three strategies are 92%, 89% and 77% respectively. Positive screening, Impact Investing and Norms-based Screening were the least used by respondents, at 66%, 52% and 44% respectively.
Regarding specific strategies, respondents’ attitudes have also changed. Taking Corporate Engagement as an example, although climate change and ESG disclosure account for a relatively high proportion, attention to greenhouse gas emissions, diversification, data security and salary incentives has grown rapidly this year, and the popularity of responsible investment has continued to increase. In addition, the number of investors using positive screening is growing rapidly. The total assets of positive screening were US$8.3 billion in 2022, nearly double from US$4.3 billion last year.
Policies and Practices Related to Responsible Investment
Respondents generally increased the disclosure of responsible investment-related documents, such as responsible investment policy statements, proxy voting guidelines, shareholder engagement policies and ESG integration plans. These disclosure ratios increased from 70% last year to 80%, reflecting greater information transparency. 52% of the respondents have disclosed all four documents mentioned above.
In terms of ESG information sources, compared with last year, the direct contact between respondents and companies has decreased (71% to 67%), and the proportion from external ESG data providers has increased (59% to 62%). In terms of sustainable investment frameworks, the frameworks most commonly used by respondents come from the Task Force on Climate-related Financial Disclosures (TCFD, 66%), the International Sustainability Standards Board (ISSB, 56%) and the United Nations Sustainable Development Goals (UN SDGs, 51 %).
In terms of greenhouse gas, 72% of respondents said they are measuring carbon emission (68% last year), and 39% have set Scope 1 2 3 targets (30% last year). 33% have joined the Glasgow Financial Alliance for Net Zero (GFANZ).
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