Canadian Institutional Investors are Committed to Positively Impacting Society Through Investments, but Need Greater Transparency, Schroders Study Finds

NEW YORK--(BUSINESS WIRE)--Canadian institutional investors have sharpened their focus on sustainable investment outcomes while continuing to seek out transparent ESG data sources, Schroders’ annual Institutional Investor study found.

The annual study, first launched in 2017, surveyed 770 institutional investors with CA$ 35.83 trillion in assets to examine key investment trends and challenges.

This year, the study uncovered that Canadian investors are differentiating themselves when it comes to their motivations to invest sustainably. When asked what was driving their focus on sustainable investing, over half (58%) of Canadian investors indicated positively impacting society and the planet as a goal. This is compared to 38% of U.S. institutional investors and 50% of global institutional investors.

Additionally, Canadian investors place a higher level of importance on seeing tangible investment impact when investing sustainably, with 54% finding it very important to understand the impact of their investment(s) on society.

ESG integration to achieve impactful investments is the preferred approach

Nearly nine in 10 Canadian study respondents (88%) ranked ESG integration into the investment process as their preferred approach when looking to invest sustainably – followed at some distance by thematic investing (62%) and active company engagement (43%). ESG integration was also the preferred approach for both global and U.S. respondents, though on a slightly lesser scale, with 75% and 63% selecting this approach, respectively.

When considering the various sustainable investment opportunities, 62% of Canadian respondents indicated they would like to invest in funds or solutions that focus primarily on delivering financial returns while broadly integrating ESG factors, higher than the global average of 58%.

Calls for regulatory clarity and reporting expectations continue

Sixty five percent of Canadian investors note that investing sustainably is somewhat or very challenging, aligning exactly with their U.S. peers. The main challenges cited among respondents included:

• Lack of consistency in disclosures/reporting frameworks (65%, compared to 47% of U.S. investors).
• Lack of transparency and data (56%, compared to 51% of U.S. investors).
• Greenwashing, due to the lack of clear, agreed upon definitions on what sustainable investment (52%, compared to 43% percent of U.S. respondents).

In contrast, U.S. investors were most focused on performance concerns (58%).

To support investors’ exploration and adoption of sustainable investing practices, it is imperative that transparent and comparable data is widely available and broadly understandable.

Canadian institutional investor reliance on third party ratings has increased from 64% in 2021 to 70% in 2022. To further fill in reporting holes, the majority of Canadian investors (54%) also rely on in-house analysis to guide investment decisions, more so than U.S. investors (31%) and global respondents (45%).

Marina Severinovsky, Head of Sustainability, North America, commented:

“As we stand at this critical juncture for sustainable investing, investors continue to make clear calls for quantifiable evidence and transparent measurements of sustainable investments’ impact. It is imperative for the financial community to deliver on these demands to ensure continued commitment to and interest in driving positive societal and environmental impact.

At Schroders, we have consistently set a high bar for investment transparency by providing evidence and robust reporting relating to sustainable investing via proprietary tools, like SustainEx for impact measurement. While 2022 is certainly an inflection point for ESG worldwide and particularly in North America, we welcome the next stage of the lifecycle where industry consistency leads to deeper investor understanding.”

About Schroders Institutional Investor Study:

Schroders commissioned CoreData to conduct the sixth Institutional Investor Study to analyze the world’s largest investors’ key areas of focus and concern including the macroeconomic and geopolitical climate, return expectations, asset allocation and attitudes to private assets and sustainable investing.

The respondents (770 globally ) represent a spectrum of institutions including corporate and public pension plans, insurance companies, official institutions, private banks, endowments and foundations, collectively responsible for U.S.$27.5 trillion in assets. The research was carried out via an extensive global survey during March 2022.

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