Canadian Investors shift focus to biodiversity and impact investing

Survey says 63% of Canadian investors dismayed by slow ESG taxonomy progress

Canadian Investors shift focus to biodiversity and impact investing

Millani has released its Semi-Annual ESG Sentiment Study, focusing on the perspectives of Canadian institutional investors.  

This study, involving 32 asset owners and managers who collectively oversee approximately $4.5tn in assets, highlights a shift in the ESG investment landscape. Key findings from the report underscore an expanding interest in biodiversity alongside climate change, emphasizing a broader environmental focus among investors.  

The report suggests that issuers need to adopt double materiality assessments to align with the changing capital flow, driven by sustainability outcomes and the impact of evolving European legislations.   

Despite the growing interest in sustainable and impact investing, the study reveals a notable absence of a standardized taxonomy in Canada, with 63 percent of respondents expressing disappointment over the government's pace in developing such a framework.  

This sentiment reflects concerns over Canada's competitive position in the global market. Additionally, the anticipation of new impact-oriented products in 2024 indicates a significant shift, with 43 percent of asset managers planning to launch such offerings, pointing to a mainstreaming of impact investing in the Canadian market. 

  The study also delves into investor preoccupations, noting an increasing focus on biodiversity, human capital, human rights, and indigenous reconciliation, while interest in equity, diversity, and inclusion (EDI) sees a decline.  

This evolving interest underscores the need for issuers to provide comprehensive disclosures on their sustainability-related risks and opportunities, as well as their impacts on society and the environment, to meet investor expectations and regulatory requirements.   

Furthermore, the report discusses the critical role of education in overcoming misconceptions about impact investing, particularly the belief that it necessitates a compromise on financial returns. The findings suggest a growing consensus that integrating ESG factors and focusing on sustainability outcomes are integral steps toward achieving positive, measurable impacts alongside financial returns.   

As the ESG landscape continues to evolve, the report emphasizes the importance of clear and precise language in fund labels to avoid "impact washing" and the need for issuers to embrace double materiality assessments for better transparency and comparability.  

With regulatory bodies increasing their oversight of ESG claims, the study calls for a concerted effort from both asset owners and managers to ensure due diligence, appropriate strategy development, and the avoidance of misleading marketing practices.