Responsible investment (RI) is increasingly gaining traction in the U.S. and Canada due, in part, to the United Nations Principles for Responsible Investment (UNPRI). At the joint F&C Investments and Jantzi-Sustainalytics seminar on Nov. 16 in Toronto, presenters shared their experiences of implementing the six principles—which were developed by an international group of institutional investors to reflect the importance of environmental, social and governance (ESG) issues—into their investment strategies and practices.
Join in
In July 2008, TD Asset Management took the UNPRI plunge because it made business sense, says Max Zhert, a sustainability analyst with TD Asset Management.
Brigid Barnett, manager, responsible investment, with the Canada Pension Plan Investment Board, said the board considered UNPRI back in October 2005 as a result of reviewing emerging trends and standards of the time. Similarly, Daniel Simard, a UNPRI board member and general coordinator with the Syndicat National de Retrait Batîrente (a group retirement savings system) said Batîrente reviewed its investment policy in 2005 and wanted to engage the corporations in its portfolio to participate.
Learning curve
But implementing UNPRI was a learning curve for both Batîrente and its asset managers, according to Simard.
But where the learning curve may be steep, Barnett says the six principles provide a framework. You can work with peers and think about best practices, she says. “You can ask them, how are you thinking about this question? It’s a bit like cheating.”
While some may wonder what the end result of UNPRI is, Simard says it is a framework or a road map, but there’s no “result,” per se. And the framework gets rid of the misconceptions of RI that are out there, Zhert adds.
“You don’t have to sign up to a set of beliefs,” says Elizabeth McGeveran, senior vice-president, governance and sustainable investment, with F&C Management Ltd. “You can add your own beliefs and still be part of it. There is great flexibility with the system.”
RI in Canada
Barnett says RI has evolved certainly with the support of the UNPRI. She believes more asset managers and asset owners will sign on to UNPRI. “It’s not as challenging to do.”
“Investments are becoming less invisible,” says McGeveran, particularly in European plans and churches. University students are interested in endowments, and pensioners are interested in the funds. “People are more engaged in investments and what the investments are doing.”
Many pension funds are considering UNPRI, says Simard, adding that in the last month, four or five asset managers have signed in Quebec, including the University of Quebec. And the University of Montreal signed up in July 2009.
Small players
While RI and ESG may seem overwhelming for some of the smaller funds, McGeveran says there are options. For example, smaller funds could hire managers who have expertise in this area, or they can simply start small, with just one asset class. F&G offers something it calls a “responsible engagement overlay,” which adds the ESG component without disruption to the company’s managers and their portfolio construction and selection.
Simard says UNPRI has more than 600 signatories, and as of last month, the assets of these signatories combined have reached more than US$21 trillion.
However, McGeveran has a word of caution for those with pens poised. “Signing to sign is not a great idea,” she says. “It has to come with some sort of process.”