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Moving Forward With Sustainable Investing

In recent years ESG has affected how investment managers select securities, construct portfolios, and engage with corporate management teams.

11.02.2021 - Giles Marshall, Vice President, Portfolio Manager,

The investment management business is always adapting to technological, regulatory and market structure changes. But in recent years, another imperative—environmental, social and governance (ESG) or, more broadly, sustainable investing—has, to a much greater extent, affected how investment managers select securities, construct portfolios, and engage with corporate management teams. Heightened environmental concerns, notably climate change, and the signing of landmark treaties such as the 2016 Paris Agreement (which currently has 196 signatories) have undoubtedly accelerated this change.

Listening to clients, we’re hearing more concern and questions about climate change and sustainable investing as it relates to individual portfolios. As you know, in building and managing your investments, Fiduciary Trust Canada draws upon Franklin Templeton Investments’ (FTI) global investment platform. FTI recognizes its clear fiduciary duty to exercise due skill and care in managing client portfolios and that good stewardship and sustainable investing have great potential to bring about positive real-world impacts as well as better client outcomes.

Despite greater recent awareness, stewardship and sustainable investing are not new to FTI. For example, Sir John Templeton excluded companies whose activities conflicted with his personal ethics and/or those of his clients as long ago as the 1950s.

Following the Global Financial Crisis of 2008-09, FTI adopted a broad-based “Responsible Investing” initiative, emphasizing and identifying potential risks arising from ESG factors. Today, that focus has broadened beyond risk mitigation. FTI now refers to the formal integration of ESG factors in its investment decision-making processes as sustainable investing, which also embraces the positive effects portfolio holdings can offer.

In formalizing and deepening sustainable investing across FTI, in March 2021, the firm established The Stewardship and Sustainability Council, which brings together stewardship and sustainability investing leaders firm wide. Its goal is to coordinate and integrate the full range of insights from FTI’s underlying and specialist investment managers. In turn, the Council is supported by a Global Sustainability and Strategy team that guides the common stewardship and sustainability agenda and supports investment managers in their decision-making processes. This team is integral to FTI’s objective of driving and embedding sustainability throughout the organization.

Our Ongoing Commitment

FTI is itself a publicly traded company so, in addition to integrating sustainable investing in our investment decision-making processes, the firm is committed to operating in an environmentally responsible manner, promoting energy conservation and waste reduction. FTI’s energy reduction initiatives, alongside other factors, have led to a 26% reduction in emissions at company-owned facilities since 2007, despite significant business expansion since then.

The impetus behind sustainable investing will inevitably accelerate as awareness and understanding deepen and broaden, and as the timeline to meet the Paris Agreement’s ambitious goals shorten. As one of the world’s largest investment managers, FTI has an important role to play in engaging with corporate management teams and enhancing long-term sustainability.

As a member of the Franklin Templeton group of companies, Fiduciary Trust Canada is an ongoing, active participant in this worldwide sustainable investing initiative.

 

 

FOOTNOTES:

  1. Specialist firms include Brandywine Global, Clarion Partners, Martin Currie, ClearBridge Investments, Royce Investment Partners, Western Asset.
  2. “Franklin Templeton Corporate Social Responsibility Report for Fiscal Year 2020,” https://www.franklintempleton.ca.

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