On October 26, 2017, the 4th Quebec Conference on Responsible Investment was held in Montreal, attracting about 400 professionals from the sector. For those who could not participate, here are some of the highlights:
The tone of the conference was given by Daniel Simard, General Manager of Bâtirente and one of the long-standing champions of responsible investment in Quebec: “… undertaking responsible investment is a tool for creating value within the reach of all investors, big and small. ” Echoing a recent speech by Christine Lagarde, Executive Director of the International Monetary Fund, the various debaters mentioned key issues to address in a responsible investment approach such as climate change, gender inequality or the reduction of the role of oil in the economy over the coming decades.
Declaration of Institutional Investors on Climate-Related Financial Risks
The culmination of the conference was the unveiling of a declaration by 30 institutional investors on financial risks related to climate change (Institutional Investor Declaration). This declaration, of which the Carbon Consult Group is one of the inaugural in-principle supports, is the kick-off of a concerted industry effort to increase disclosure of information related to the impacts of climate change by Canadian public businesses. Carbon Consult Group – whose expertise is recognized in the quantification of carbon emissions across the value chain, as well as identification and management of climate-related risks, and adaptation to climate change – is a partner of choice to facilitate the implementation of the declaration.
The conference also revealed the results of several recent studies highlighting the importance of responsible investment in the Quebec province and the international arena:
- The Research Institute of Contemporary Economics (IREC) reported the results of its “Status of responsible finance in 2016” (in French) according to which half of Quebec’s financial assets would now be invested considering environmental, social and governance (ESG) factors. To justify this finding, the author of the study explains that responsible finance is increasingly perceived as being quite profitable;
- Finance Montreal’s report (in French) highlighted Montreal’s reputation as a sustainable investment center for domain experts. On the other hand, its low financial mass, mainly due to the absence of a stock exchange, places the city in ninth place worldwide, while Toronto is fifth in the ranking. Among the opportunities identified for Montreal, would be the creation of a center of expertise in responsible investment in the mining sector and an increased and concerted collaboration of existing players in the ecosystem of sustainable investment;
- A study (in French) from the University of Sherbrooke, puts forward a significant link between a company’s environmental, social and governance reputation and the returns generated by the financial assets issued by the company.
Unfounded negative perception on the performance of responsible investment
During the Symposium, a survey was conducted among the participants. The results showed that despite all existing evidence, the belief that the integration of ESG factors sacrifices some of the performance persists within the financial professional community. This perception represents a major challenge that has the potential to penalize both financial companies and their clients in the long term. Thus, it is necessary to continue to provide awareness and education. This is one of the reasons why, among other services, Carbon Consult Group, offers practical and innovative training and workshops guaranteed to generate a long-lasting perception shift.
Long-term vision
àOn another theme, it was discussed the fact that a culture of ‘short-termism’ leads to reckless behavior on the part of company executives. Indeed, a survey of 400 Chief Financial Officers shows that 78% of them admit that they would sacrifice value for good quarterly profits and 55% would give up an investment with a positive net present value so as not to break the consensus on earnings per share. Jean-Luc Gravel, Senior Vice President, Equity Markets at Caisse de Dépôt et Placement du Québec, draws attention to the fact that profitability requires patience and vision. According to Mr. Gravel, a long-term vision must be a pillar of any investment approach. It will provide better risk-adjusted returns, but also a powerful lever for changing corporate practices. In this long-term perspective, the integration of ESG factors becomes an unavoidable and inseparable part of the investment strategy.
Finally. Here are some information and recommendations shared by prominent organizations (Sustainable Investment Initiative-IFD, CFA, RIA-AIR and UNPRI) that promote responsible investment in Canada:
- CFA certifications include more and more content related to ESG issues;
- The focus of the community must be on how to put into practice the responsible investment, the tools and the skills to support it. In return, the integration of ESG competencies into the teams responsible for allocating investments should be prioritized over the formation of separate specialist teams. To do this, it would be necessary to allocate the necessary resources and be ready, if necessary, to look for specialized help externally;
- Although nearly 75% of investors admit to being interested in responsible investing, only a small proportion take action according to the RIA. There is a need to educate and train investment advisors to encourage them to talk about responsible investment options with their clients.
Conclusion
The 4th Quebec Conference on Responsible Investment has more than ever showed that the financial community is in the middle of a transformation towards responsible investment practices. In fact, in Montréal, the sector has access to an ecosystem of quality specialized services that can help it achieve its ESG integration goals.
At Carbon Consult Group, we offer training and support services tailored to your size, your aspirations for responsible investment and your degree of advancement. Our goal is to enable you to acquire the expertise necessary for your long-term success in identifying and managing risks and creating business opportunities related to climate change.
by Alex Iordan, Director of sustainable finance, Carbon Consult Group