Transcript: What is Responsible Investing and Why It's Surging
Length: 7 minutes and 56 seconds
Dilys D’Cruz, Vice President of Wealth, Meridian
Fred Pinto, Senior Vice President and Head, NEI Investments
This is an introduction to responsible investing and a discussion around why it’s currently surging.
[Dilys] In the last two years, responsible investing has grown in Canada by 48% to $3.2 trillion and represents almost 62% of Canada's investment industry. Retail mutual funds are up 36% and ETFs have more than doubled in this space. These are the stats that were just released in the 2020 Canadian Responsible Investment Trends Report sponsored by NEI Investments, a long-time leader in responsible investing and our asset manager at Meridian Wealth Responsible investing is not only picking up massive momentum, it's here to stay. I asked Fred Pinto, Senior Vice President and Head of NEI Investments to help provide us with some insights on this fast evolving investment trend. Welcome Fred.
[Fred] Hi Dilys, how are you?
[Dilys] I’m very good thanks. Great to talk to you.
[Fred] Great to talk to you as well.
[Dilys] So let's start with, maybe just talking about what is responsible investing.
[Fred] That's a great question Dilys, and a number of our investors have exactly the same question and you know quite frankly, the industry has not done a great job in really being specific because there's a lot of jargon out there. There's SRI. There's ROI. There's ESG. And so, in a nutshell, responsible investment and investing rather, is an approach that incorporates environmental, social and governance factors in the selection and the management of assets. Now that's the technical definition. I think of responsible investing as a way to grow your wealth and do it in a sustainable way.
[Dilys] And that simplifies it so much because it is confusing. There are so many terms out there. So, I was wondering if you can actually talk to us about, tell us a bit about NEI? You have been a leader, you've been around a long time. Tell us a bit about your company,
[Fred] For sure. Thanks. Well, first and foremost, you hit the nail on the head. We are your asset manager at Meridian and we're actually the asset manager for all Canadian credit unions. We’ve been in the responsible investing arena for a long time. We launched our first fund about 35 years ago. And, since then we built upon that legacy with what I believe is an amazing and industry leading, responsible investing program. We are 100% committed to this space. It's all we do. And in fact, we are moving across our entire investment platform to a RI focused lineup. And I said, it's what we do. It's who we are. It's our core value narrative. And, and from my perspective, we welcome the many new entrants that are coming into the space, because from our perspective, we don't think of it as just responsible investing. We think of it as, as a way to invest going forward.
[Dilys] Yeah, I was going to say you've been around a long time: 35 years. And so, certainly an expert in this field. And I also understand, you know, NEI has a unique, different differentiator with regards to ESG, but more specifically on the corporate engagement side. So, can you explain to us a bit about what you do with companies and how you work with them?
[Fred] For sure. And, I would say Dilys, it's one of the elements in our ESG program and it really is a program that I'm most proud of. And I'm most proud of our team that that goes out and does what we consider to be active ownership. So, we start off with saying no company is perfect. You know, there's lots and lots of companies out there on a number of different exchanges. No company is really perfect. We can help them improve upon certain issues, whether they're on the environmental side, the social side, the governance side, to make them better companies to improve their policies.
So for example, in 2020, during these COVID times, we've seen a lot of companies actually enact policies on the social side to improve the welfare of their workers. And, that's something that we totally support. We also see companies in the energy patch actually, look at ensuring that there's a smoother transition to a cleaner economy.
And so, fundamentally our role as responsible investors and specifically as it relates to corporate engagement is to be active owners: to represent the many, many different Canadians that are investors in our fund and give them a seat at the corporate table to allow us to move forward these various agendas
[Dilys] You know, what I love about that Fred is that you're not only helping investors make an impact. You're helping companies make an impact and together, we're going to make an [00:05:00] impact to the world with everybody going in the same direction. And so, there's almost been this myth about trading off returns, if you want to invest responsibly. Is that the case?
[Fred] You know, it's one of the long-lasting myths in responsible investing. And, I won't tell you how long I’ve been involved with responsible investing, but from the very first moment, I was talking to someone and they said, well Fred, responsible investing by definition, that means you're going to give up returns because you're excluding companies. And, from our perspective, there is absolutely no trade-off in return. What we are doing is we're actually ensuring that companies that display and have some of these E, S and G risks are actually excluded from portfolios. And, that will give us a more improved risk and return profile down the line.
In fact, if I look back at the first quarter of this year, and I'm sure we all went back to the first quarter of this year and say, oh my gosh what a quarter it was with the onset of the crisis. Responsible investing solutions outperformed their conventional peers. 70% of them actually outperformed their conventional peers.
And so, when we see periods of volatility, when we see periods of market risk, , this is where really responsible investing because it excludes the companies that have much more risk than other companies in the universe.
[Dilys] So, that's a topic I'd love to come back to at another time with you or one of your team members to really just talk about that performance and how you choose companies and how they are doing overall. Because, even I think that our advisors and investors and consumers would be very interested in knowing more about that. So, Fred, if there was one thing you want to leave us all with, with regards to responsible investing [00:07:00] that you feel that we should know, what would that be?
[Fred] I would say, you can have both, You can build your portfolio and you can have it be a responsible investment portfolio that quite frankly leaves a legacy.
For your kids and your friends.
[Dilys] Okay. So that's fantastic. Fred it's great to have you and your team as Meridian’s asset manager. And, this is just another way for Meridian and its Members to be able to make a social impact. And so, partnering with you is just the ideal match. Thanks so much. And, for anybody who wants to find out more about responsible investing, feel free to reach out to a Meridian advisor. Fred, it's been great chatting.
End of video.