Discuss ESG funds with young investors

Therefore, advisors should take a leading role in addressing the issue of ESG investment with this clientele, the manager said. They must listen to his messages and beliefs.

“Generation Z wants to invest in companies they believe in and that reflect their societal values. Consultants should be the catalysts for these problems, “he said.

Three letters that matter

Of the three letters that make up the abbreviation ESG, the first one, which refers to the environment, is the one that has an advantage among young people, says Sylvain de Champlain. The energy, water treatment and purification sectors are among the most popular.

“They want to make sure there are no fossil fuels or weapons in their wallets. These are the two things that stand out the most. »

The letters S and G, relating to the social aspect and management of companies, over the next few years will have to occupy more space in the investment decisions of this clientele, the adviser said.

“Companies that want to attract young investors need to show more that they play a positive role in society, that they treat their employees well and care about society. »

The new clientele wants to invest according to their values, but is not ready to compromise on the return. If green funds, developed ten years ago, could leave customers dissatisfied in terms of efficiency, today it is not, says Sylvain de Champlain.

“As of December 31, 2021, our ESG models are ahead of traditional portfolios by about 0.5%. As of March 31, 2022, despite the dizzying rise in oil prices and the decline in ESG, productivity in 3 years has almost equaled that of our traditional models and our ESG models, ”says the manager.

The company gradually began to implement ESG funds in accordance with environmental, social and management criteria. “Several new investors (especially young ones) at 100% ESG. In addition, we have gradually integrated ESG funds into our traditional portfolios over the past few years. »

Currently, almost 20% of the company’s assets under management are invested in responsible funds out of a total of almost $ 245 million. Sylvain de Champlain’s goal is to increase this share over the next few years, in particular by involving ESG managers in traditional portfolios. He estimates that a “very high percentage” of investment portfolios will meet ESG criteria in 5-7 years.

Educational role

Young people want to influence society with their money. Thus, one strategy is to work with managers who can influence shareholders to set goals for companies in their portfolios. If the set goals are not achieved, the titles can be revoked, which is equivalent to sanctions against companies found in default.

You have to have a keen eye to determine the right criteria, says Sylvain de Champlain. “The provisions are not yet very reliable in terms of defining ESG criteria. Some companies claim to offer ESG funds, but when we look at securities in detail, we see that they are not as green as advertised. »

In this context, the advisor plays an important educational role with new investors to help them invest in accordance with their values, without sacrificing profitability and productivity, and without being distracted by the sirens of the market.

As of April 30, 2021, the MSCI Focus ESG, a sub-index of the MSCI Canada, had an average five-year average return of 6.64% compared to 6.20% for the MSCI Canada.

Source: Desjardins