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How can sustainable solutions address investors’ concerns?


BCBusiness Addenda Capital

With clients from British Columbia to the Maritimes, Addenda Capital has a prime view of investors’ concerns among which climate change, for many, is now top of mind. According to a recent poll by the Responsible Investment Association, 85% of Canadian investors want companies to establish plans for net zero emissions by 2050, and 78% would like part of their portfolio to be invested in companies providing solutions to reduce carbon emissions. This focus has led firms like Addenda Capital to create innovative investment solutions, such as its Climate Transition equity funds, and to join the Net Zero Asset Managers initiative, a global group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050. We sat down for a chat around future challenges and opportunities with the firm’s President and CEO, Roger Beauchemin.

Can a portfolio that aligns with net zero aspirations be compatible with optimal performance?

“The answer is yes. We believe that a forward-thinking company—one that understands that there will be a price for pollution, that we must aim for energy efficiency, that we must travel less or travel differently, that we must take into account the carbon footprint of services and activities—will have a definite advantage. Because if a company follows this approach faster than others, it will result in superior performance. This is how the most dynamic and agile companies will benefit from lower operating costs, as they will be less affected by pollution pricing. Their ability to generate profits will be greater, which will have a positive effect on the value of the securities and the financial performance.”

How does your analysis of ESG factors stand out?

“Our approach isn’t based on specific security exclusions, although we have shut out controversial weapons, which are immoral and illegal under Canadian law. Obviously, some clients, on account of their values, want to exclude companies or sectors, which is legitimate. That said, our approach aims rather to broaden the financial analysis by adding extra-financial elements, which allows us to better assess risks and opportunities that could have a potential impact on a security in the longer term.

From our point of view, securities of companies that demonstrate a better handling of extra-financial factors, such as the environment, the well-being of employees, supplier management and good governance standards, those securities tend to outperform and yield more sustainable growth rates. In particular, this allows us to allocate capital to companies that offer a positive contribution to society. For example, aligning capital with the 17 United Nations Sustainable Development Goals can advance sustainable development solutions while providing compelling financial returns.”

Sustainable investing has reached a certain stage of maturity. What new trends are emerging?

“Version 1.0, which consisted of removing securities from portfolios, turned out to be quite disappointing and provided financial results perhaps below expectations. Today, in addition to the fact that we can combine objectively measurable financial returns and extra-financial returns, another trend is developing. This trend involves investing in sectors and companies with an environmental mindset or that promote, for example, the representation of women, minorities or Aboriginal people in management positions. Let’s also note the importance given to the climate transition and the structural changes needed to achieve the objectives set in the Paris Agreement.”

What role do investors—including individual investors—play in the energy transition that Canada’s economy must address?

“Investors are all playing a phenomenally important role in this shift. The reality is that the Canadian economy is largely extraction-based and that we are a major producer of energy, much of it fossil-based. We must transform it, starting with the three most emitting sectors: oil and gas, transportation, and buildings. By making the right choices, investors can make companies understand that they must operate and produce differently and that, ultimately, consumers will themselves buy differently. We believe that Canadian companies are fully capable of handling this transition and gaining a clear comparative advantage.”

How do you envision the sustainable investing sector five years from now?

“I believe that all investors will have come a long way and that the investment strategies available will be even better. The sustainable investing we know today will simply become business as usual. The younger generation understands this and cannot think of if any other way. Sooner or later, everyone will be on board.”

What values ​​drive a firm such as Addenda in helping clients achieve their goals?

“Our culture is based on values ​​such as teamwork, trust, respect and integrity. Bearing this in mind, we place the customer at the heart of our priorities. The assets we manage support different channels: insurance products, retirement income, retail investment products, etc. Since our teams go beyond financial analysis during the investment process, the capital we invest generates compelling returns for our clients as well as benefits for society. Considering that sustainable investing is at the core of our activities, this contributes to the strength and sustainability of our business.”

Learn more | addendacapital.com

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Created by BCBusiness in partnership with Addenda Capital