Canadian investors say there’s still life in ESG, study finds

ESG isn’t dead, it’s just gone mainstream. That’s one of the key observations from a new semi-annual survey of Canadian institutional investors, which points to a focus that goes beyond data gathering and on to impact.

This is being driven, in part, by an uptick in the number of companies conducting double-materiality assessments and indications from the Ministry of Environment and Climate Change Canada that the country will have a transition taxonomy by December 31, 2024.

That’s according to the latest ESG sentiment study from Millani, gathering together responses from 37 asset owners and managers, representing approximately C$5.4 tn ($3.8 tn) of assets under management.

An evolution, not a death
Researchers looking to answer the much-debated question of whether there’s still life in ESG put the question directly to investors – and the response is a resounding yes. More than four fifths (81 percent) say ESG is not dead, while 16 percent say it is evolving.

Almost all (94 percent) add that polarization of the term in the US has failed to impact their investment strategy.

‘The general sentiment is that the investment industry has matured, as it has developed better regulations, definitions and tools, and that there has been significant progress toward sophistication in ESG practices today,’ the Millani researchers write.

The report also highlights some comments from the firm’s investor survey: one asset owner who uses a multitude of asset managers notes that ‘[ESG] is now part of the mainstream. The problem is, there has not been a lot of definition of what ESG is…. [Today,] if you are not looking at ESG risks, you are not looking at the entire equation of your investments.’

One investor comments on recent debate around the term as being par for the course – ‘this is a normal rite of passage for any theory of change; it needs pushback and to be pressure tested to make itself more applicable’ – but another pushes the idea that it is more about how ESG is viewed: ‘I think that in the US they think [ESG] is exclusions. It’s not exclusions, it’s the integration of ESG factors, and new regulation is going to clean things up.’