Here’s why you should integrate ESG criteria into your investment selection process — and how to do it.

Today, ESG is mainstream among institutional investors. In fact, To points out that almost every Canadian is already an ESG investor because the Canada Pension Plan applies ESG analysis to all of its investments. It’s also so core to the operations of large businesses that about three in four S&P 500 companies tie executive compensation to ESG performance.

Furthermore, it’s increasingly recognized that demand for renewable energy is being driven by the private sector — for example, by technology companies that want to move away from fossil fuels —rather than government incentives. To says this “sustainable appetite” stands to benefit ESG investors and the advisors who guide them toward appropriate investments.

ESG screening helps to mitigate risk

While attracting clients and uncovering investments with attractive long-term growth potential may be the flashy side of ESG integration, risk mitigation through ESG investing is probably even more important to build a practice that is successful over the long term. 

As a case in point, in 2022, one of the largest U.S. natural gas and electric utilities agreed to pay more than US$55 million to escape criminal prosecution for two disastrous California wildfires because its power lines were implicated in the blazes. 

“If you had ESG baked into your approach, then this is a company that may have been screened out because of these unsafe power lines,” To suggests, emphasizing that the US$55 million was a drag on the company’s performance and therefore investors’ returns. 

In general, companies that take ESG seriously tend to be more transparent with their investors, he adds, often disclosing more details about their operations than what’s strictly required from public companies. More information helps investors mitigate risk and gives them greater confidence in investment decisions.

Of course, not everyone is equally transparent. Greenwashing — when a company or fund manager pretends to be greener than it is — still happens. For example, a German asset management company recently paid US$25 million to settle U.S. Securities and Exchange Commission charges stemming, in large part, from misstatements concerning the firm’s ESG investment process. Again, a significant cost to the company diminishes investors’ returns.

“It’s important to address greenwashing [and] to ensure there are standards and disclosure requirements for fund managers,” says To.

Design investment policies around client priorities

Integrating ESG into your practice starts with client conversations. 

As part of the discovery process, To says advisors can probe to find out if investing in environmentally friendly companies or companies that have fair labour practices connects with a client’s values. Then, in ongoing client meetings and through financial literacy workshops, they can introduce ESG concepts, aided by illustrations like the ones available through Visual Capitalist.

“Having an earnest conversation with clients is the first step. If ESG values are important, then you can move to the next step and start screening managers for their ESG adherence,” he says.

ESG investors generally expect two things from ESG investments: a social impact and a financial impact.  

To measure the social impact, advisors can check a fund’s holdings against ESG ratings set by MSCI, S&P, and Sustainalytics, which scour the web for corporate data and other information — such as news articles — about a company. It’s a good signal when the vast majority of the fund’s holdings rate highly. 

To measure the financial impact — in other words, the effect on returns — advisors can measure a fund against a benchmark. ESG screening of a fund’s holdings should have a material impact on financial performance against a peer group. Ideally, it will also help to diversify a client’s portfolio. 

Now you’re ready to match specific funds to a client’s investment policy statement, and then clearly communicate social and financial results through customized ESG reports. 

“A best-in-class SRI policy [which considers financial returns and ESG benefits] goes beyond the surface-level aspects of ESG and strives to create a meaningful and measurable impact on society,” says To. “It’s important for advisors to really go into the weeds with clients. Being specific on what they want to accomplish is key.”

As countries move to a net-zero climate goal, investors can capitalize by aligning their portfolios in a way that supports the transition. But with so many investment options, it can be difficult to understand the nuances of each strategy.

Christian Felx, Manager and Head of Responsible Investment at Desjardins Global Asset Management (DGAM), and Pierre-Luc Vachon, Head of Products, Investment Strategies, at DGAM explain the various approaches to responsible investment (RI), and how net-zero ETFs are part of the solution.

Q: How have RI approaches evolved in recent years?

Christian Felx: A growing number of investors are opting for investment solutions that promote sustainable prosperity, with RI assets under management (AUM) growing to more than $3 billion in recent years, according to the Responsible Investment Association. The main reason behind this growth is that we were able to bridge the gap between sustainability and financial performance. We have moved from exclusionary strategies to more sophisticated strategies based on analytical frameworks. We now know that using environmental, social, and governance (ESG) criteria in the investment process helps identify risks and opportunities that are sometimes overlooked by traditional financial analysis.

Q: Can you detail the approaches used in RI ETFs?

CF: First, we need to establish the investment universe. Often, most RI strategies  will exclude sectors or companies associated with undesirable activities, such as controversial weapons or tobacco producers.

Second, we assess the ESG performance of issuers with a proprietary scoring methodology. This allows for efficient identification of opportunities and mitigation of risks. For example, an approach that integrates ESG momentum will allow for issuers that have lower or average ESG practices but are set to improve on them in the coming years.

Third, there’s portfolio construction, where investment mandates may include an ESG dimension. For example, net-zero trajectory objectives can be added to the investment objective of some strategies without sacrificing the portfolio’s expected financial return.

Last, there’s shareholder engagement, which is a lever for positive change. The portfolio manager engages in a constructive dialogue with the company, further improving on their understanding of the business, and giving them the opportunity to influence the ESG issuer to adopt sustainable development practices.

“Desjardins’ net-zero pathway ETFs target their climate objective while providing broad and diversified equity market exposure.”

Q: What are the advantages of ETFs with net-zero trajectories?

Pierre-Luc Vachon: A net-zero trajectory aligns with the objective to limit global warming to 1.5 °C, and targets improvement in the portfolio’s carbon emissions over time. Previous approaches to decarbonization would simply offer a reduction compared to a benchmark, which wouldn’t necessarily improve over time.

Q: How do net-zero ETFs differ from other RI ETFs?

PLV: On the Canadian ETF market, there aren’t a lot of strategies targeting carbon emissions, let alone strategies aligning with net-zero objectives. Desjardins’ net-zero pathway ETFs target their climate objective while providing broad and diversified equity market exposure.

Q: How is Desjardins’ Net-Zero Emissions Pathway ETF focused on RI?

PLV: Our approach is light on exclusions, excluding only companies involved in controversial weapons, tobacco production, thermal coal, or severe controversies. We also use ESG scores derived from our own internal analysis or from third parties.

We’re aiming for a portfolio that’s well diversified and provides exposure to most sectors while meeting net-zero objectives. For instance, the portfolio construction process enforces geographical and sectorial diversification, and avoids excessive concentration in any single security.

We’re offering the strategy in a traditional version and a multifactor version, which adds another step to the process where we allocate the portfolio securities’ weights to maximize exposure to factors that have been shown to add value in the long run.

Q: How can advisors and their clients be part of the RI solution?

PLV: Demystify RI and its misconceptions. It’s sometimes believed that RI ETFs exclude all companies from the energy sector, while in fact, some strategies will invest in energy companies if they have robust ESG practices or a strategy to improve the ESG integration in their business model, and low carbon emissions relative to their peers.

Another misconception relates to the belief that integrating an RI dimension to the strategy’s objective will inevitably impact performance negatively. This topic has been subject to meta-studies^* where researchers didn’t find support to these claims.

Understanding that there are diverse approaches to RI is crucial. Each product and strategy may vary, even if they come from the same issuer. Therefore, it’s essential to thoroughly examine the product and gain a clear understanding of what’s being offered.

*Sources: G. Friede, T. Busch, and A. Bassen, “ESG and financial performance: aggregated evidence from more than 2000 empirical studies,” in The Journal of Sustainable Finance & Investment (2015); DWS Group; Hamburg University; and SSRN.

Why are active ETFs gaining popularity in your view?

Andrei Bruno: You can broadly put ETFs into three categories: passive, smart beta/factor, and active. Historically, active strategies have been in the realm of the mutual fund space. But now we’re seeing a lot of active strategies come to ETFs, including equities and fixed income. And that’s partly because advisors are now adopting the ETF vehicle. You’re starting to see certain advisors who buy only ETFs now. Twenty years ago, that would’ve been unheard of.

How do active ETFs differ, and what are the potential benefits of active ETFs?

AB: As we know, passive strategies track an index. So you’re getting beta exposure. For example, with an S&P 500 index strategy, you’re simply getting market exposure. But the primary goal of active strategies is to seek to drive alpha. So, in other words, active strategies seek to outperform the market.

Active strategies are more tactical. If there’s changing investor sentiment, certain styles are more in favour. It might be a growth market. Tactical active strategies can shift around their positioning. They can go more overweight growth or underweight value, for example.

“ Analyze the investment objectives, what the strategy is, what the style of the portfolio manager is, and what areas they’re investing in — whether that’s asset classes, geographies, or cap sizes. ”

And there’s typically a lot more research that goes into active strategies. For example, in a broad-based market active equity

ETF, the portfolio manager would look at each and every sector. Since the main goal is to seek to drive alpha, security selection is extremely important.

Are there any emerging trends in active ETFs?

AB: Over the last two or three years, we’ve seen options strategies become more popular. So, whether it’s protective put strategies, equity buffers, or covered call strategies, those have been tremendously popular as of late, and we continue to see assets flow into these areas of the ETF market.

What factors should investors consider when evaluating active ETFs?

AB: When you’re taking a look at an active strategy, analyze the investment objectives, what the strategy is, what the style of the portfolio manager is, and what areas they’re investing in — whether that’s asset classes, geographies, or cap sizes. Take a look under the hood to see what you’re getting, and overlay that with the rest of your portfolio. You may see a portfolio manager who has tremendous returns and say, “Hey, I want to add that manager’s fund to my portfolio.” But it’s also important to ask, “What are my current risks? What are my current exposures in my portfolio right now? Am I adding to those risks? Am I diversifying those risks? Am I ending up too concentrated in a certain geography, a certain asset class, or a certain style tilt?”

How do Fidelity’s equity active ETFs provide potential for outperformance?

AB: At Fidelity Investments Canada, we draw on a vast network of research and investment professionals across the globe. We have investment analysts who cover every aspect of the market, whether that’s specific sectors, asset classes, or geographies. This helps us make in-depth and well-thought-out investment decisions with the goal of seeking to outperform the markets.

Why is it important to have both fixed income and equity active ETFs?

AB: You generally want to be diversified. And your investment horizon will affect the allocation of fixed income versus equity. If you’re getting close to retirement, capital preservation is a lot more important, so, generally, you want to be overweight to shorter duration, high-quality fixed income relative to equities from a risk perspective. Conversely, younger investors have a longer investment horizon, so they may be able to absorb a little more risk and be more tilted toward equity relative to fixed income.

How can advisors discuss active ETFs with clients?

AB: Advisors can consider talking to their clients about the potential for alpha generation relative to index strategies. Whether you’re talking about fixed income or equities, there’s an opportunity for security selection with active ETFs. With index strategies, there’s less wiggle room around what particular securities you can put in that basket. So, the investible space in active ETF management can be a little larger.

For instance, with fixed income active ETFs, portfolio managers can participate in new issues. Index strategies typically can’t. They have to wait until the rebalance period before they can add those new issues into the index, which then gets added into the fund.

Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in mutual funds and ETFs. Please read the mutual fund’s or ETF’s prospectus, which contains detailed investment information, before investing. Mutual funds and ETFs are not guaranteed. Their values change frequently, and investors may experience a gain or a loss. Past performance may not be repeated.

The statements contained herein are based on information believed to be reliable and are provided for information purposes only. Where such information is based in whole or in part on information provided by third parties, we cannot guarantee that it is accurate, complete or current at all times. It does not provide investment, tax or legal advice, and is not an offer or solicitation to buy. Graphs and charts are used for illustrative purposes only and do not reflect future values or returns on investment of any fund or portfolio. Particular investment strategies should be evaluated according to an investor’s investment objectives and tolerance for risk. Fidelity Investments Canada ULC and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered.

From time to time a manager, analyst or other Fidelity employee may express views regarding a particular company, security, and industry or market sector. The views expressed by any such person are the views of only that individual as of the time expressed and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time, based upon markets and other conditions, and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity Fund.

© 2023 Fidelity Investments Canada ULC. All rights reserved. Fidelity is a registered trademark of Fidelity Investments Canada. The presenter is not registered with any securities commission and therefore cannot provide advice regarding securities.

With longer, healthier lives on the horizon for Canadians, retirement can now last 20 to 30 years instead of what it used to be 10-15 years ago. Add in an uncertain economy, and creating future financial security becomes a complex challenge. This infographic explores how today’s 40-somethings can find opportunity and confidence in today’s volatile market through long-term, income-generating investment funds.

Learn more

Investment professionals are increasingly interested in companies adopting practices that reduce risk and ensure their long-term viability. More and more of them are integrating ESG criteria into their investment decisions.[1] However, due to the lack of standardization or, in some cases, the absence of data, it is difficult to get an accurate and complete picture of the true value of a company’s ESG risk management.

The lack of reliable data is one of the main obstacles to the growth of responsible investment according to industry players.[2]

This is where artificial intelligence (AI) comes to the rescue: AI includes a variety of emerging technologies that have made it possible to automate complex tasks at speeds and volumes never seen before. For businesses, this new reality is changing the way they can use and process data. For portfolio managers investing in those businesses, it is a valuable decision-making tool. Here’s how some of National Bank Investments’ (NBI) open architecture partners are using AI in responsible investment (RI).

AI to identify intangible risks

Much of artificial intelligence’s potential comes from natural language processing (NLP) algorithms. These algorithms can identify perceptions, track emerging trends, and detect controversies around companies.

For example, some of our portfolio managers use the services of firms that analyze communications from hundreds of thousands of public sources on stakeholders’ discourse around companies in a multitude of languages. They are therefore able to detect whether companies are consistent in their disclosure on human rights, labour standards, and their environmental commitments among other issues.

AI and the rise of spatial finance

AI models can also analyze the risks associated with ESG factors from a spatial perspective. That is, using a large set of geospatial data, they contribute to identifying climate risks and opportunities related to a specific location. For example, sea-level rise, extreme weather events and temperature patterns can be projected.

By linking this information to the geographic location of their assets, investment professionals can decide to reallocate capital to more resilient areas or to protect existing assets by investing in adaptation measures.

AI to measure positive impacts

The use of AI goes far beyond risk management. It can be useful in identifying and choosing to invest in companies whose products or services have a positive impact on the world. For example, portfolio managers could use AI to align their investments with the United Nations Sustainable Development Goals.

These technologies, which are still emerging, should provide greater clarity on how issuers’ operations fit into solutions to global challenges.

AI as a competitive advantage and its limits

By building AI capabilities, professional investment firms ensure a more accurate collection and analysis of the massive amount of information available, giving them a head start on their investment decisions.

While AI can make essential data accessible to the search for sustainable investments, it does have its limitations. The capacity to distinguish reliable information from the amount of data available remains a very human ability that technology will not replicate anytime soon.

The information and the data supplied in the present document, including those supplied by third parties, are considered accurate at the time of their printing and were obtained from sources which we considered reliable. We reserve the right to modify them without advance notice. This information and data are supplied as informative content only. No representation or guarantee, explicit or implicit, is made as for the exactness, the quality and the complete character of this information and these data. The opinions expressed are not to be construed as solicitation or offer to buy or sell shares mentioned herein and should not be considered as recommendations.

© 2023 National Bank Investments Inc. All rights reserved. Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank Investments Inc.

® NATIONAL BANK INVESTMENTS is a registered trademark of National Bank of Canada, used under licence by National Bank Investments Inc.

National Bank Investments is a signatory of the United Nations-supported Principles for Responsible Investment, a member of Canada’s Responsible Investment Association, and a founding participant in the Climate Engagement Canada initiative.

[1] Canadian RI Trends Report, 2022

[2] Canadian RI Trends Report, 2022

The U.S. healthcare sector offers what many investors seek: large companies, consistent demand, and innovative growth tailwinds. The sector contains a diverse array of subsets, each with their own growth drivers in both the shorter and longer terms. They include pharmaceutical companies, biotechnology firms, and managed care providers that provide insurance, and run clinics and hospitals. Combined, the US healthcare sector offers a long history of consistent growth, with a market capitalization multiples greater than the entire TSX.

“We see in the U.S. healthcare sector an attractive set of massive companies, with dominant market shares and innovative business practices,” said Harvest ETFs Chief Investment Officer and Portfolio Manager Paul MacDonald. “We’ve identified three permanent, non-cyclical and consistent growth drivers for these companies: aging in the developed world, economic growth in the developing world, and the steady stream of innovations these companies offer.” 

MacDonald manages the Harvest Healthcare Leaders Income ETF (HHL)—the largest US healthcare ETF listed in Canada. He explained that as North American and European populations age, a larger cohort of individuals will require pharmaceutical drugs, medical technologies, surgeries, and managed care. He noted as well that in developing countries like China and India, growth in healthcare spending has outpaced growth in GDP for most of the past 20 years. 

The healthcare sector can offer these growth drivers because healthcare is a superior good. Put simply, healthcare is essential to consumers and countries, and they are far less likely to cut their spending on it when a recessionary period hits. 

That doesn’t mean the healthcare sector doesn’t face its own headwinds. Despite outpacing market growth for the past 15 years, the healthcare sector is often sensitive to two “Ps”: patents and politics. 

When the patent for a particular drug or technology expires after about 20 years, the owner of the patent loses exclusive rights to produce and market that drug or technology. On major drugs and technologies this can have negative short-term impacts. Patents are a somewhat cyclical challenge in the healthcare sector for pharmaceuticals, medtech, and biotech. MacDonald explained that they can be managed relatively well, however, with patent extensions and new innovations. 

“Healthcare companies innovate constantly,” MacDonald said. “Taking large-cap pharma as an example, companies like Merck & Co. Inc.  have huge R&D pipelines and the capital required to capture value from innovations by smaller companies.”

MacDonald is particularly bullish on two innovation themes that continued in 2023. The first is approval of new diabetes and weight loss drugs could fundamentally change the fight against a range of chronic illnesses and open a market potentially worth upwards of $50 billion by 2030. While many have heard of Ozempic, more late-stage trial results from Eli Lilly & Company with their drug Mounjaro, have seen very strong results with many expecting this to be approved by early 2024 for the treatment of obesity. The second is in medical devices, essential tools like dialysis machines, infusion pumps, or hip replacements that are being updated almost constantly. Many of these companies are also innovating robotic-assisted surgeries which can help clear surgical backlogs and deliver far better patient outcomes.  

The other “P” is politics and that’s the factor most likely to impact sentiment around healthcare going into 2024. US politicians on both sides of the political spectrum have used healthcare companies as a political punching bag, making some investors more wary of the sector during election cycles. 

MacDonald explained, however, that throughout its history the US healthcare sector has weathered these political storms. Even when policies are passed that appear to alter the system—such as the Affordable Care Act or the drug price provisions in the Inflation Reduction Act—these businesses find a way to innovate and grow. Moreover, following their key role in resolving the COVID-19 pandemic, these companies are viewed more favorably by the general public and have not been subject to the same levels of rhetoric as in past prior to the pandemic. 

“The things that make regular investors nervous, like politics and patents, make a seasoned healthcare investor look for opportunity,” said MacDonald. 

He explained that the HHL ETF is designed to manage these cyclical changes while capturing the long-term growth drivers in healthcare. It does so by investing in a portfolio of 20 mega-cap healthcare companies, diversified across subsectors and styles. Mega-cap companies typically have the greatest market share and greatest ability to survive and even thrive economic cycles. Diversification offers ballast—when a headwind impacts biotech, pharmaceuticals and managed care might be unaffected. HHL also pays a high annualized income yield generated through dividends and an active covered call strategy. 

“By writing covered calls on our holdings actively, we can pay consistent monthly cashflow to unitholders while ensuring as much of the portfolio as possible is exposed to market upside,” MacDonald said. “That income can contribute to total returns through any short-term downturn, while the portfolio’s mega-cap diversified holdings can capture the long-term upside potential we see in healthcare.” 

National Bank Financial – Wealth Management (NBFWM) continues to gain traction among advisors and clients alike. And there are quite a few reasons for this, including support from all levels of leadership and seamless technology. Both make for a better client and advisor experience.

Senior Wealth Advisors and Portfolio Managers Sean Durkin and Amy Dietz-Graham of The Durkin Dietz Group at NBFWM explain why they made the transition two years ago.

Q: What makes NBFWM different from other brokerages?

Sean Durkin: We try to keep our eyes open in terms of what our competitors are doing. We didn’t have a lot of familiarity with NBFWM, so we went through a due diligence process. As we progressed, we came to appreciate the intersection they had between a special client experience and a special advisor experience. Often, you’re focused on only one, and it comes at the expense of the other. But we found NBFWM actually did both very well.

Amy Dietz-Graham: We also found the culture to be collaborative and supportive from all levels. Leadership is very accessible. That’s why there’s that balance between client and advisor experience. They understand what clients are feeling, how they’re using systems, how they’re interacting, and what services they’re looking for, while also following up with advisors to make sure our lives aren’t more complicated. It’s about making things more simplified so we can spend more time working with clients.

SD: The communication is quite frequent as well. It’s not something that happens once a year. The dialogue is ongoing, and it’s a refreshing approach in how to manage a business.

Q: What was the onboarding process like?

ADG: The onboarding team was alongside us every step of the way as we learned new systems or had any questions. We had a dedicated transfer team making sure things were moving at a good pace. We had another team focused on documentation once we submitted information. And we had another team focused on training our associates on the different systems. We were able to lean on the teams to get us through that busy period. Everything was seamless for both the advisory team and our clients.

SD: Often, a transition like this can take the better part of a year. But we were able to do the bulk of it within the span of a few weeks because the technology is leading edge. Q: Can you further detail the technology?

ADG: It’s easy for the advisor to use, and the output for the client is well put together. The financial planning system was built in-house with the client mindset. Clients can easily view and understand reports.

It’s about how they approach the solutions versus just throwing more spreadsheets at us. For example, when KYP evolved, they had a system in place that was user-friendly so we could get that task done in an organized fashion.

And the technology has been a massive time savings for us. For example, at tax time, it would take me evenings and weekends and months to go through tax and organizing things. But I’m now able to do that within a week during regular business hours. And it was user-friendly for our clients to log in and navigate. It reduced the number of times they had to call us because they couldn’t find something or needed to reset passwords.

Q: How has your business changed since joining NBFWM?

ADG: It has allowed us to reengage with our clients in a more meaningful way. Instead of fussing through administrative tasks, we’re spending more time talking to clients — we’re doing Microsoft Team live events; we’ve put podcasts together — especially high-net-worth individuals, they’re busy in their day-to-day lives, so we want to be available in whatever way it makes sense for them to communicate with us.

SD: Over the years we have been able to expand our practice in a predictable and consistent manner. Working here, leveraging the technology and support we now have available, we feel our ability to grow can be achieved more effectively and efficiently than ever.

Q: What would you say to other advisors looking for a change?

ADG: Do your due diligence and find the right fit for you. Keep an open mind. We were pleasantly surprised to see the client and advisor experience woven through everything we touch day to day.

SD: It’s rare to find an organization that embraces the entrepreneurial spirit of the advisor and supports you with the strength and ability of a large, Big Six bank. But NBFWM has done exactly that.

Looking for a change? Make the move: nbfwm.ca/career

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National Bank Financial – Wealth Management (NBFWM) continues to reach new heights of growth. And one of the keys to its success is that the brokerage offers advisors the best of both worlds — the ability to be an independent entrepreneur, while being backed by a national firm. Edward Svetek, Senior Wealth Advisor & Portfolio Manager at NBFWM, discusses why he made the transition in 2018.

And we made the right choice. The support we received when we transferred made it an easy transition. Obviously, it’s a hard thing to do. But they brought in people from Montreal and Toronto to help us with our paperwork. And management was, and still is, very supportive.

Q. How does NBFWM differ from your previous brokerage?

ES: There’s very consistent management. They care about you growing your business. They want you to be entrepreneurial. They ask how they can help. We even get calls from Jonathan Durocher, the president of NBFWM, to see how we’re doing and if we need anything.

Again, it’s all about the technology here. During COVID, we could work from home. It was easy with the way the technology is set up and the programs they have in place, including Croesus (to manage client portfolios), Advice Suite (to manage financial and estate planning), and CRM (to keep organized). My previous firm didn’t have that technology.

The training department is also very good. They help you build your team and enhance your ability to use the technology better to run your business. And the estate planning department is top-notch for clients. They spend a lot of quality time with our clients and the output is very helpful.

Q. How has your business grown since joining NBFWM?

ES: We’ve increased our business 10% to 15% each year since we moved. And that’s even during COVID. It’s because we’re able to offer a full financial plan to clients. We look at all their money and goals and give them a road map to follow to achieve what they want. We’ve also built relationships with the bank, including various branches, and the commercial side of the business to get new clients.

Q. How does NBFWM provide the best of both worlds, in that you can be an entrepreneur that’s backed by a national company?

ES: There are five people on my team, including my partner, Mitch Robinson, and me. And while we have access to upper management to answer any questions or guide us, they let you run your business. We have different people we can turn to in the company to help us in portfolio management, on the trading side, on the bond side, or even for structured notes, for instance. We can pick up the phone and call them. But they let you be an entrepreneur and grow your own business.

And there’s no selling of proprietary products, which is the biggest thing that’s important to me. I don’t have to buy National Bank products for my clients just because I’m an NBFWM advisor. This gives me the ability to build my practice the way I see fit for my clients.

Q. How have your clients reacted to the transition? 

ES: It was seamless for them. And we continue to get a lot of referrals from our clients because of the job we do for them, and how we take care of them. We have a lot of multigenerational families whose investments we manage, and then we get referrals for their friends, too.

Q. What would you say to advisors looking for a change? 

ES: Everybody who wants a change should definitely look at National Bank Financial – Wealth Management because it’s a premium brokerage that allows you to be an entrepreneur. They’ll let you independently run your business but help you when you need it.

Looking for a change?  Make the move: nbfwm.ca/career

PAID CONTENT

Ongoing market volatility — due to rising interest rates, geopolitical risks, and inflation — has investors on the hunt for more defensive approaches, like dividend strategies. And investors prefer strategies that take responsible investment (RI) into consideration. In fact, 73% of investors want their advisors to discuss RI opportunities, according to the 2022 RIA Investor Opinion Survey.

The search for dividends and RI creates an opportunity for advisors to help clients. In mid-April this year, Desjardins launched the Desjardins SocieTerra Global Dividend Fund for retail investors. It’s one of the first ESG (environmental, social and governance) dividend funds on the retail market. Jean-François Girard — Manager, Mutual Fund and Guaranteed Investment Development, at Desjardins — discusses how a dividend RI fund can meet client needs.

Q. Why is there a need for this fund now?

A. Current market volatility and the recent performance of many dividend stocks have created increased interest in this kind of strategy. In response, with the portfolio manager Sarasin & Partners, we offer a new option for investors seeking to invest in high-quality, cash-generating sustainable businesses that have the capacity to pay rising dividends over time. This can lead to lower earnings volatility and lower share price volatility for the company compared to the market, which is key for investors.

Q. Can you detail how a dividend RI fund can add to a portfolio strategy?

A. The fund is an unconstrained multi-thematic equity strategy. Sarasin & Partners is looking around the world to invest in top-tier companies and provide a premium level of dividend income. The fund is also a high-conviction portfolio of 40 to 60 stocks with a long-term investment horizon, and low anticipated turnover. It’s a strategy with high active share.

The fund considers ESG analysis in every step of the process. We exclude specific sectors or companies based on their activities. We identify climate risks and opportunities and assess how companies are positioning themselves to manage these risks and capture the opportunities inherent to the low-carbontransition. Sarasin & Partners uses a tool called CVaR (Climate Value-at-Risk), which translates the risks and opportunities of climate change to an investment perspective. Basically, this tool shows you how climate change impacts the valuation of a business. It can be positive or negative, depending on the company.

Further, Sarasin & Partners invests based on five key RI megatrends: aging, digitization, evolving consumption, automation, and climate change. These megatrends will play a role in shaping our future for a sustainable society.

The minimum dividend target with this fund is 15% more dividend income than the MSCI World Index.

Q. What competitive advantage does the fund provide advisors?

A. The SocieTerra Global Dividend Fund is an RI fund that meets investor demand. And through a global dividend strategy, it provides a specific dividend target so investors can generate cash flow. The focus on the five key megatrends is really a key distinction, and the defensive and active approach of the strategy helps to manage risk.

Q. How does an RI fund differ from other dividend funds?

A. There are only a few dividend-oriented RI funds in the market. So that’s the key distinction. The minimum dividend target with this fund is 15% more dividend income than the MSCI World Index.

And the megatrends we focus on are also of note. Aging, for example, is really interesting because the world’s population continues to increase. So this means the pattern of consumption will shift, bringing opportunities in financial services and healthcare. Meanwhile, automation will result in increased productivity and be supported by falling technology costs and the way we use AI. It will sweep across all industries. Some sectors are already there, but most are in the early stages of adoption. So it’s a great opportunity for us.

Also, many funds focus on mature companies. But we even look at disruptive-growth companies, which typically aren’t included in dividend portfolios. These companies have the ability to grow through innovation and disruption, and are starting to profit, providing investors with cash flow and dividends. Based on their experience, our portfolio manager saw that these companies provide superior risk-return over time. So it’s interesting because the market usually underestimates their potential and misprices this kind of company.

Q. Whom is this fund designed for?

A. We developed the product to meet the needs of all retail investors looking for an RI approach and cash flow through dividends. It was a good challenge for us to develop this fund while respecting our robust RI policy. The goal was to ensure investors can attain higher dividends and still meet their RI goals.

Jean-François Girard Manager, Mutual Fund and Guaranteed Investment Development, at Desjardins

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The Desjardins Funds are not guaranteed, their value fl uctuates frequently, and their past performance is not indicative of their future returns. The indicated rates of return are the historical annual compounded total returns of the date of the present document including changes in securities value and reinvestment of all distributions, and do not consider sales, redemption, distribution or other optional charges, or income taxes payable by any securityholder that would have reduced returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The Desjardins Funds are off ered by registered dealers. Desjardins®, all trademarks containing the word Desjardins, as well as related logos are trademarks of the Fédération des caisses Desjardins du Québec, used under licence.

In our sometimes-divided world, certain themes can be unifying because of the importance of the issues they represent. The imperative net-zero targets and the Paris Agreement signed by 194 Parties are a good example. The conclusion of numerous scientific studies on climate change is unequivocal: we, as a society, must consider the sustainability of our decisions for the benefit of future generations. Climate change will not solve itself and requires concerted action.

A number of investment solutions focused on energy transition has emerged in recent years. For conscientious investors, these solutions offer a way to contribute to a low-carbon economy. Whether it’s by investing in renewable energy funds or by selecting companies that have set targets to reduce their emissions, investors who want to go down this path have choices.

However, the responsible investment market is still relatively unregulated, and the resulting confusion can be a deterrent. As responsible investing generates interest and products in this category multiply, so do investor expectations.

Canada’s response

It is with this goal in mind that several organizations have taken it upon themselves to develop sustainable finance frameworks. Canada, through the Canadian Climate Institute, recently released a draft climate investment taxonomy¹. This new guide is designed to help investors identify investments that contribute to Canada’s goal of net-zero emissions by 2050.

The Canadian taxonomy is a comprehensive system that classifies projects into four categories: green, transition, enabling and excluded. These categories help identify investments that support a low-carbon economy and provide greater clarity for investors.

Both a reference tool and a roadmap toward net-zero objectives, this taxonomy is one of the many frameworks that we see emerging in the sustainable finance industry.

Sustainability according to National Bank Investments

How do you choose investments that respond to the many climate issues? The answer for National Bank Investments (NBI) was found in the form of a robust existing framework: the 17 United Nations Sustainable Development Goals (SDGs). The NBI Sustainable solutions are actively managed investment solutions based on these well-known goals. Adopted by UN Member States, the SDGs are a guide to investing in an inclusive and sustainable economy, helping to protect the planet and improve the lives of people around the world.

By aligning with the SDGs, NBI is well positioned to take advantage of the additional transparency proposed by Canada’s climate taxonomy. Moreover, the transition to a low-carbon economy responds directly to Goal 7, Affordable and clean energy. Many of the underlying assets of our Sustainable solutions are selected to meet this objective. For example, our solutions invest in financing renewable energy projects, bond issues for the energy-efficient transformation of buildings, or in companies manufacturing electric vehicle components.

Canada recently took a major step toward sustainable and transparent finance. For its part, NBI maintains its commitment to support climate goals that aim for a low-carbon economy. Through its range of products financing numerous social and environmental projects, NBI’s Sustainable solutions are ideal solutions for a climate-conscious portfolio!

NBI Funds and NBI ETFs (the “Funds”) are offered by National Bank Investments Inc., a wholly owned subsidiary of National Bank of Canada. Commissions, trailing commissions, brokerage fees, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus of the Funds before investing. The Funds’ securities are not insured by the Canada Deposit Insurance Corporation or by any other government deposit insurer. The Funds are not guaranteed, their values change frequently and past performance may not be repeated. NBI ETFs units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. NBI ETFs do not seek to return any predetermined amount at maturity.

© 2023 National Bank Investments Inc. All rights reserved. Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank Investments Inc.

® NATIONAL BANK INVESTMENTS is a registered trademark of National Bank of Canada, used under licence by National Bank Investments Inc.

National Bank Investments is a signatory of the United Nations-supported Principles for Responsible Investment, a member of Canada’s Responsible Investment Association, and a founding participant in the Climate Engagement Canada initiative.

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¹ Government of Canada, 2023, Taxonomy Roadmap Report, https://www.canada.ca/en/department-finance/programs/financial-sector-policy/sustainable-finance/sustainable-finance-action-council/taxonomy-roadmap-report.html