A good first step towards clearer ESG conversations

The framework outlines six approaches to RI – ESG integration and assessment, ESG thematic investing, ESG exclusion, impact investing, ESG related activities and best ESG – with definitions for each.

For example, the framework describes ESG thematic investment funds as those that identify “breakthrough themes” such as board diversity and clean technology, and invest in companies that can benefit.

CIFSC members will consult their respective databases to identify funds that use one of the six responsible investment (RI) approaches. The end result will be a consolidated list of funds on the CIFSC website by the end of the year, broken down into six categories, says CIFSC President Ian Tam. Some funds may belong to more than one category.

Ian Tam notes that the Investment Industry Regulatory Organization of Canada’s (IIROC) ESG and Know Your Client guidelines from December 2021 have helped shape the framework, as advisers are expected to assess a client’s ESG benefits.

“You don’t have to do anything with that information – you just have to show that you’ve asked questions and taken notes about how this client wants to invest. But from there, the next logical step is: “Let me try to find responsible investments that might be suitable,” says Yang Tam.

“That’s really what we’re trying to answer. Currently, it is very difficult to understand which funds are “responsible” and which are not… We will do some of this work [pour vous]. »

Carol Smith, adviser at Desjardins Independent Financial Safety Network, says the framework is “going in the right direction” to help advisers and their clients invest in ESG and RI.

“With funds categorized by the RI approach, I think it will help advisors reduce the research time needed to start comparing funds,” she says. This resource can also help advisors comply with the latest customer-centric reforms such as know-your-product. »

Peter MacIntosh, an adviser at MacIntosh Financial Group, based in Gibsons, British Columbia, says the system will help him explain the funds to clients.

“It gives advisors the tools to determine exactly what those approaches are based on what they call CIFSC. It just helps define things a little better,” he says.

While the framework defines how different ESG funds fall into six categories, “it’s not going to be the definitive solution because there are so many funds and so many ESG classifications,” warns Carol Smith.

She would like to see a “one-stop shop” for ESG and RI, where advisors can define an ESG investment approach along with fund ratings and investment performance.

Ian Tam believes that performance verification will continue to be the responsibility of individual CIFSC member data providers.

Peter McIntosh would like to have a resource that brings together all of the fund data in one place.

“That’s where we need to go beyond just knowing the names of the funds … to be able to compare apples to apples,” he concludes.