A recent report by the Responsible Investment Association says “responsible investing is entrenched in Canada,” with $3-trillion in assets under management.
Factoring in environmental, social and governance (ESG) performance and goals has become a fundamental tool in the decision making of Canadian investors.
What forces will shape responsible investing in 2024?
1. Green Bonds for Growth
Fixed-income instruments that support renewable energy or affordable housing have long appealed to responsible investors.
But access and pricing have proved challenging for many.
Investors have plenty of choice here, too, from exchange-traded funds to mutual funds.
2. Embrace Sustainable Investing
ESG and sustainable funds offering exposure to broad, diversified indices are abundant.
These funds will hold lower-volatility stocks, which will be less negatively affected by high inflation, rising interest rates and declining economic conditions.
Investors already have many choices in this space.
3. Fission is on a Mission
Renewable energy sources such as wind and solar are likely to fall short of filling the energy options – to be created by phasing out fossil fuels.
Uranium is likely going to fill some of that gap because it’s relatively clean from a climate change perspective with North American producers have seen renewed interest.
With mines some of the largest, richest deposits in the world, is likely to see increasing demand from the western world.
4. More Screening for Fossil Fuels
Although the energy industry has rebounded, the growth of funds that are free of fossil fuels is unlikely to abate in 2024.
Among newer entrants are CIBC’s Sustainable Funds series, which includes its Sustainable Canadian Equity Fund (CSCE-NE), where it screens out oil and gas companies while limiting exposure to other holdings in the portfolio.
5. Coming Clean on Greenwashing
Greenwashing came to the forefront in 2022 as leading investors labelled ESG as window dressing to attract capital.
At the same time, regulators are also looking more closely at greenwashing – will be a positive for responsible investing.
Companies looking for responsbile investing can no longer good enough to make claims; they need to back them up.
Increasingly, investors are going to demand to see that data to make sure asset managers are not engaging in greenwashing.
Looking for resposible investing? Look no further than IQI Canada! Chat with us for your next big step towards green investment.
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