A new study finds Canada behind by multiple measures, but there are hints of progress
As investors become increasingly convinced of the benefits of responsible investing, the need for asset managers to push toward ESG integration has become clearer than ever. What has for years been a march is turning into a race — and Canadian managers could be losing.
In a new survey of ESG integration among 299 asset managers around the world, Russell Investments has found that a vast majority are signatories to the globally recognized UN Principles of Responsible Investment (UNPRI), and have implemented responsible investment policies internally.
Looking at the data by geography, the firm found that managers based in the United States, Canada, and Asia (excluding Japan) lagged substantially behind peers from other regions. While UNPRI adoption went as high as 88.5% among those in continental Europe and 70% among Japanese firms, that number was a modest 55.5% among US managers, and 51.9% for those in Canada. The Asia ex-Japan category fared most poorly, as no manager in the group said they were a UNPRI signatory.
“This trend also aligns with the timeline by which these countries signed up to the UNPRI,” Russell Investments research analyst Puneet Thiara noted. “Over 50% of respondents in North American regions (i.e., the U.S. and Canada) only became UNPRI signatories after 2015.”
Canadian asset managers also did not do well when it came to internal responsible investment policies. When asked whether they had one, 63% said they had one in place; 11.1% said they were developing one, and 25.9% said no. Among the regions examined, only USA and Asia ex-Japan had fewer firms with such policies (59.4% in the US, 40% in Asia ex-Japan).
As for the number of dedicated ESG professionals, the global average was very low, with only 36% of firms around the world having professionals who devote at least 90% of their time to ESG-specific matters.
“On a regional scale, firms domiciled in the US, Canada and Asia (ex-Japan) have the lowest percentage of firms with dedicated ESG professionals versus all surveyed regions,” Thiara noted. She cited AUM as “a very strong factor”: while 92% of firms with more than US$500 billion in AUM have dedicated ESG professionals, 91% of those with less than US$10 billion don’t have any.
Russell Investments found that 31% of responding managers use of proprietary ESG capital market research in support of ESG integration efforts, with such research efforts decreasing as firm-wide levels of AUM decreased. The research also found that firms located in the US, Canada, and Asia ex-Japan did not prioritise internal ESG capital market research.
“That said, there were indications that firms based in the US and Canada are progressing towards those levels of adoption and integration,” Thiara said. “It will be important to measure the year-on-year changes in ESG integration to gain better clarity into the rate of progress for the US, Canada and Asia ex-Japan as they catch up to regional peers.”
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