Emerging Trends in Sustainable Investing

Download the whitepaper to find out about the best practices and wildcards that are influencing the evolution of sustainable investing around the world.

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With sustainable investing moving into a new and more mature phase, a set of trends and best practices are beginning to emerge.

AGF Investments commissioned a second edition of a Coalition Greenwich study on sustainable investing where 143 pension funds, endowments and foundations in North America and Europe were interviewed about sustainable investing.

From the results of that research, a series of factors were identified that are influencing the evolution of sustainable investing around the world. Below are some key highlights from the study.


Best Practices Our Strategy Wild Cards Why AGF Team Insights

 


 

 

Best Practices

Heightened Expectations for Investment Performance

While some of the earliest adopters of sustainable investing were prepared to make a trade-off between impact and returns, the majority of institutional investors today expect sustainable investments to match or outperform investment benchmarks—while also delivering positive impact.

• More than half of asset owners expect investment returns from sustainable investments to match or exceed relevant benchmarks.

• Other ways institutions expect sustainable investments to help their portfolios include enhance diversification and reduce overall portfolio risk.

• Institutions expect their sustainable investments to deliver all these benefits while also producing positive environmental and social impact.

 

Performance Expectations From Sustainable Investings

performance-ecpectations-from-sustainable-investmets

Source: Coalition Greenwich 2023 Sustainable Investing Study. Based on 141 respondents in 2021 and 143 in 2023.

 

Journey Toward Full Integration

Although investors today are using a variety of approaches, the long-term trend appears to be a clear movement toward full integration of sustainable investment practices into investment processes across portfolios, asset classes and strategies.

• Full integration is projected to grow to 3X today’s level in 5 years
• Almost 55% of European and  40% of North American institutions have fully integrated sustainability across their entire investment process and portfolio. Within 5 years, that number is expected to grow to:
63% Europe,  55% North America

Emerging Trend: A growing share of institutions are treating sustainability as an investment “factor” akin to growth and value.

Factors Driving Sustainable Investing


Factors Driving Sustainable Investing - Europe-North America

 

Enhancing Potential for Impact and Returns with Thematic Strategies

Even as investors move to integrate sustainability fully into their portfolios, they continue to employ thematic strategies that allow them to concentrate assets in order to enhance environmental and social impact, as well as investment returns.

Overall, usage rates are down slightly from 2021, at no surprise given the shift among institutions away from discrete allocations to sustainable strategies and toward full integration of sustainability criteria across all investments. What might be less expected is that a majority of institutions that use these strategies actually expanded their allocations to thematic funds over the past three years.

In  2023,
84% of European institutions increased their allocations, compared to 68% in 2021.
53% of North American institutions increased their allocations, compared to 65% in 2021.

Asset owners see a continued role for thematic funds.
• Impact perspective: allows institutions to concentrate their assets and influence on the issues they see as most important.
• Investment performance perspective: provides institutions with a focused mechanism to take on exposure to what they see as powerful, ESG-related growth trends.

Our Strategy

A strategy aiming to outperform broad global equity markets by providing differentiated positioning focused on sustainable themes. The team seeks to make an impact by providing capital to companies developing solutions to key sustainability challenges, and by measuring both financial and non-financial performance.

 

 

Wild Cards

No Consensus on Impact Measurement

As yet, the investment industry has not reached any universal agreement on how best to measure the non-financial performance and impact of sustainable investments.

Asset owners are experimenting with a variety of methods to quantify and track impact:
• 39% Asset manager reports
• 37% Reporting guidelines
• 33% Third-party provider
• 31% Independent review
• 13% No process
• 12% Not relevant to their investment objective

The industry remains divided in terms of sustainable investing data sources.
Of the 59% of asset owners that use third-party data, there is a high degree of dispersion in the ratings and data from the various providers.

 

Regulatory Headwinds and Uncertainty

Political pushback and lingering regulatory uncertainty around the world remain headwinds to the continued growth of sustainable investing.

60% of institutions see emerging international, regional and federal regulation as one of the primary variables affecting both their own sustainable investing programs and the development of the industry as a whole.

 

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Why AGF for Sustainable Investing

Our Responsibility

At AGF, we believe that responsible and sustainable practices should influence the shape of our organization. We apply forward-thinking practices related to environmental, social and governance factors in establishing strategic priorities to benefit all of our stakeholders – employees, clients, shareholders and communities.

Learn More

Our Commitment to Sustainability

AGF is a signatory and member of:*

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Investing Sustainably for Over 30 Years

Launched in 1991, the AGF Global Sustainable Equity Strategy was one of the first sustainable investing funds, providing exposure to companies developing solutions to key sustainability challenges.

*AGF Management Limited (“AGF”) is a member of the 30% Club. AGF Investments Inc. is a member/signatory of UNPRI, CERES, RIA, CDP, Climate Action 100+ and SASB Alliance. AGF Investments Inc. is a founding, paying member of the RIA and holds a seat on the Board of Directors. AGF International Advisors Company Ltd. is a signatory to the LGPS Code of Transparency and UK Stewardship Code. ^Climate Action 100+ is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. AGF Investments Inc. has been designated as the lead investor through nomination and is responsible for engaging on a set of principles and processes developed for investor signatories by the initiative.

 

Investment Team

AGF’s Sustainable Investment Team is led by Martin Grosskopf, a thought leader in sustainable investing with over 25 years of portfolio management experience. In addition to having dedicated Sustainable Investment team members, they are also supported by AGF’s broader equity analyst team and additional global investment resources.

The team believes strongly:
1. The world is transitioning to a sustainable economy and investors can benefit financially from this transition in addition to positively contributing to it through their allocation of capital.
2. Industries evolve according to powerful themes and catalysts, not GIC sectors. To address key issues of sustainability, investors need to take a GICS-agnostic approach and embrace high active share.
3. Markets are short-sighted and become reactive to themes. Investors can exploit these inefficiencies for financial gain by proactively investing in sustainable themes.

Martin Grosskopf
Martin Grosskopf, MES, MBA
VP & Portfolio Manager
AGF Investments Inc.
Vishal Bané
Vishal Bané, MSc Green Economy, CA (India), CFA®
Portfolio Manager
AGF Investments Inc.
Manna Neghassi
Manna Neghassi
Director, Sustainability Portfolio Specialist
AGF Investments Inc.
VP & Portfolio Manager

Martin Grosskopf manages AGF Investments’ sustainable investing strategies and provides input on sustainability and environmental, social and governance (ESG) issues across the firm’s investment teams. He is a thought leader and a frequent public speaker on ESG and Green Finance issues. He serves as Vice-Chair of the CSA Group technical committee on Green and Transition Finance and is a past member of the Responsible Investment Association (RIA)’s Board of Directors.

Martin has more than 30 years of experience in financial and environmental analysis. He previously served as Director, Sustainability Research and Portfolio Manager with Acuity Investment Management Inc., which was acquired by AGF Management Limited in 2011. Before joining the financial industry, Martin worked in a diverse range of industries in the areas of environmental management, assessment and mitigation. He was a project manager with CSA International from 1997 to 2000 and, prior to that, served as an environmental scientist with Acres International Limited.

In 2023 Martin was a recipient of the Canada Clean16 Award for his work furthering sustainability in the financial sector. Martin obtained a B.A. from the University of Toronto and an MES from York University, and earned an MBA from the Schulich School of Business.

Portfolio Manager under AGF Investments Inc. and AGF Investments America Inc.

Portfolio Manager

Vishal Bané serves as a Portfolio Manager for the AGF Global Sustainable Equity Strategy, leveraging his extensive Environmental, Social and Governance (ESG) analysis experience to evaluate the strategy’s ESG risks and opportunities.

Vishal joined AGF in 2017 as an Analyst. Prior to that, he worked in ESG Research at MSCI Inc. and gained additional industry experience at the National Stock Exchange of India.

Vishal is a Chartered Accountant (national merit-holder) with the Institute of Chartered Accountants of India and holds a Master of Science in Finance from the Beedie School of Business at Simon Fraser University in Vancouver. He is also a CFA® charterholder.

Portfolio Manager under AGF Investments Inc. and AGF Investments America Inc.

Director, Sustainability Portfolio Specialist

Manna Neghassi is Director, Sustainability Portfolio Specialist with primary responsibility for supporting AGF’s global sustainable mandates. In this role, he is tasked with building relationships with existing and prospective clients and staying up-to-date on market trends, portfolio positioning and the thematic outlook. Manna is also responsible for developing presentations, commentaries, market insights and white papers.

He brings more than 16 years of financial services experience in ESG, transition and physical climate risk as well as in credit risk and factor investing within different functions such as advisory, portfolio and risk management, and product management. Manna also has experience supporting and engaging with a wide range of clients, including asset managers, asset owners, banks and non-financial corporates.

Manna has a Master of Science, Management of Risk from St. John’s University, Queens, New York and a Bachelor of Science, Electrical Engineering from Worcester Institute of Technology, Worcester, Massachusetts.

*Damola Adesoye and Manna Negassi are employees of AGF Investments Inc. In order to meet the needs of our clients, AGFA engages one or more affiliates and their personnel in the provision of services to our clients, please see disclosure below for further details.

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Source: Coalition Greenwich 2023 Sustainable Investing Study. Based on 141 respondents in 2021 and 143 in 2023.

The commentaries contained herein are provided as a general source of information based on information available as of September 28, 2023 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Market conditions may change and the Portfolio Manager accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

The information contained in this website is designed to provide you with general information and is not intended to be Investment advice applicable to the circumstances of the investor. Investors should consult their investment professionals prior to implementing any changes to their investment strategies.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

The strategies presented are available to institutional clients via various channels. Clients accessing the strategy through a Separately Managed Account (SMA) platform will experience performance results that differ from results produced by AGF Investment discretionary management of the strategy based on a number of factors, including but not limited to fees charged, implementation of the strategy by the SMA provider and investment restrictions applicable to each client’s account.  AGF Investment America Inc. does not have investment authority over client accounts accessing the strategy through a SMA platform.

AGF Investments America Inc. is a registered investment advisor with the U.S. Securities Exchange Commission and is fully owned by AGF Management Limited, a Canadian reporting issuer.

In order to meet the needs of our clients, AGFA engages one or more affiliates and their personnel in the provision of services to our clients pursuant to written agreements (including dual employee) among AGFA and its affiliates and pursuant to which AGFA supervises the activities of affiliate personnel on behalf of our clients (“Affiliate Resource Arrangements”). For example, our portfolio managers are also portfolio managers of another affiliated adviser licensed and operating in Canada. Research and trading teams used by AGFA are employed by the same Canadian affiliate, AGF Investments Inc. AGFA may also engage affiliates to sub advise certain mandates on behalf of AGFA. We also delegate certain client liaison, portfolio accounting and reporting and client servicing to AGF Investments Inc.

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