Can your investment goals really align with your social values?Published: 25/09/2020
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"We cannot solve our problems with the same thinking we used when we created them."
~ Albert Einstein
Can your investment goals really align with your social values?
What is the ultimate goal for someone to invest? Growing their money? Earning income? Getting a superior return? The answer will definitely vary depending on who you ask, and after considering a multitude of factors. Today, there is another consideration that is growing rapidly when it comes to investing. Many are looking to align their investments with their personal values. Investors want their money to not only grow, but to also make a positive impact on society and the world at large.
According to Global Sustainable Investment Alliance, Environmental, social and governance (ESG) investing grew to more than $30 trillion USD in 2018*. And momentum is growing. As investors' demand for transparency increases and their social conscious continues to grow, that number is set to keep rising. ESG strategies are not new, with the term ESG dating back to 2004. What has changed though is that where ESG was once seen as detrimental to a portfolio's return and using this strategy was uncommon, it has now almost become the norm.
ESG is nothing new at TDAM
In April 2009, TD Asset Management Inc. (TDAM) became a signatory of the Principles for Responsible Investment (PRI) and adopted a Sustainable Investing Policy. TDAM realized early on that incorporating sustainability criteria within our investment framework was compatible with our goal of maximizing long-term financial returns.
Considering ESG factors not only contributes to the greater good, it also provides us with a more robust view of potential risks and opportunities that are likely to influence the value of an investment. In many ways, the Sustainable Investing Policy formalized an approach that we had employed for quite some time.
ESG oversight at TDAM in 2020
Our ESG consideration continues to evolve. Today, we have a dedicated ESG Engagement Committee that oversees our overall ESG strategy and integration efforts. The committee facilitates discussion around ESG issues, engagements and policy direction and is made up of a diverse set of seasoned professionals and includes members of the investment management, external distribution, and investment risk teams.
The committee strives to ensure that the sustainable investment approach is well implemented across our platform, and that our ESG strategy is clearly communicated across the business. The work of the Committee is communicated to upper management, including the Chief Executive Officer, Chief Investment Officer and portfolio managers, all of whom serve critical roles in advancing sustainability across the firm and within client portfolios.
The tradeoff between returns and personal values
Many investors struggle with the idea of ESG investing and the perceived detriment it is to investment returns. How much of a return is enough to give up to satisfy your personal values? Taking it a step further, is this in fact true – do returns need to be sacrificed to invest in a socially responsible way?
At TDAM, we understand the dual impact of many ESG issues; where they can impact the financial direction of companies (and by extension share price/performance) and the environment in which they operate. Under our approach, financially material ESG factors are weighed alongside other traditional investment criteria, with investment implications resulting if an ESG issue or event changes the intended risk/return profile of an investment. Additional attention is given to any ESG issues that may add systemic risk and impede the long-term sustainability of financial markets overall.
A new firm wide policy
This past month, we announced exciting news supporting our commitment to Sustainable Investing. The TDAM Sustainable Investment Approach, is a new firm-wide philosophy that further articulates our commitment to investing responsibly and serves as a guidepost for how each of our investment teams' approach ESG integration when selecting investments. As investors in a broad array of investment classes, hawse have a significant role to play in being a positive influence for continued improvement in ESG. Rob Vanderhooft, Chief Investment Officer at TDAM, was also recently on MoneyTalk discussing the new firm-wide philosophy.
Please visit our ESG page that houses important information around our approach to ESG.
*Global Sustainable Investment Alliance, 2018 Global Sustainable Investment Review.
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