Sustainable investing having its moment amid rise in awareness of social inequalities

Sustainable investing is exploding in Canada as the coronavirus and an anti-racism movement highlight long-standing social inequalities.

Net inflows into Canadian exchange-traded funds that track companies focusing on environmental, social and governance factors has surged to $740 million.

That has already outstripped the $200 million invested in 2018 and the $142 million last year, excluding seed capital, according to TD Securities Inc.

With 15 new ESG products launched in Canada this year, investors now have 38 ETFS focused on impact investing to choose from.

“In a time where the conscious investor is experiencing and observing a great deal of social and economic change, funds that provide exposure to companies that are aware of the environmental, social, and governance impact of their businesses have increased in popularity,” said TD analyst Andres Rincon.

COVID-19 has hit the weakest and lowest-paid the hardest, and investors are taking a closer look at how companies pay and treat workers, community engagement and support during the outbreak and whether corporations have been agile enough to rework their manufacturing facilities to make personal protection equipment.

Global protests on systemic racism are also shining a light on the stark difference in companies’ diversity efforts.

Both are bringing the “S” in ESG investing front and centre.

“The pandemic has reinforced the importance of taking ESG into consideration when assessing corporate strategy, operational risks and competitive positioning,” said Bloomberg Intelligence analyst Adeline Diab during a live Bloomberg Q&A on ESG investing this week.

And despite a rout at the end of the first quarter that saw global stock markets plunge on coronavirus concerns, ESG ETFS in Canada saw “great momentum in their asset-gathering potential,” signalling that investors are sticking to their bets on social and responsible investing, said Rincon.

It is fair to say that the pandemic ... has increased the legitimacy of responsible investing.

ANDRES RINCON, TD analyst

ESG flows worldwide have been mimicking gold, acting as a haven in times of market upheaval, Diab said during the Q&A.

The vehicles may even increasingly be considered an alternative to low-volatility strategies in a market downturn, according to a report she published in April.

“Although COVID-19 is not yet in the rear-view mirror, it is fair to say that the pandemic has further cemented a loyal base of investors in ESG ETFS and has increased the legitimacy of responsible investing,” Rincon said.