Devastating forest fires, droughts, flooding and landslides, beaches littered with trash and marine wildlife entangled by plastic — climate change and plastic waste are growing environmental crises that extend to all corners of the world. The pervasiveness of these issues in news headlines have spurred ongoing concern from citizens and growing expectations of meaningful corporate citizenship.
The Scotia Global Asset Management Investment Team recognizes its opportunity to play a leadership role in allocating capital for society’s long-term best interests while upholding their fiduciary duty of acting in the best interests of their clients.
As one of Canada’s largest asset managers, Scotia Global Asset Management places the highest priority on the stewardship of its clients’ assets, and Environmental, Social and Governance considerations (ESG) are a key component in delivering long-term value to clients. The investment group found plenty of opportunities to encourage businesses to innovate and target capital spending toward changing the way we treat our environment, as well as each other, which are detailed in the 2022 Stewardship and Responsible Investment Report.
“Rather than taking a solely passive, exclusionary approach to ESG investing, we deliver investor value through a fundamental, active approach, enhanced by our own in-depth ESG research,” says Daniel Yungblut, Head of Research and Chair of the ESG Investment Committee.
“We take engagement with the companies in which we invest very seriously. It’s about planting seeds and sustaining pressure, to have an influence on significant real-world problems and effect change over time,” he says.
Scotia Global Asset Management has considered ESG factors in the due diligence process for decades and has sought to formalize its approach to ESG over the past several years. That includes becoming a signatory to the United Nations supported Principles for Responsible Investment (PRI), creating an internal ESG investment committee and taking a leadership role in several organizations focused on responsible investment including Responsible Investment Association (RIA) and the Canadian Coalition for Good Governance.
“By doing this we are helping to shape policy and influence capital markets to address a range of societal challenges,” Yungblut says.
At the same time, engaging closely with companies on these issues helps the investment team identify the leaders of tomorrow — investments that have governance structures that ensure longevity and consistent results; sustainable operations that are aligned to environmental regulations; and socially diverse and inclusive standards that drive customer, employee, and community value.
While there are no easy or quick fixes to slow the impending crises and fix societal issues, Scotia Global Asset Management contends that by ensuring companies it invests in on behalf of its clients are well-researched and are encouraged to make changes for a better future, it can help make a difference.
Climate change
While dependence on fossil fuels isn’t about to disappear overnight, the report notes that Scotia Global Asset Management is encouraging oil and gas producers, oil sands and pipeline companies to use some of their capital toward researching innovations and solutions that will help reduce that dependence as quickly as possible.
For example, during a meeting with a major oil and gas producer ahead of its annual general meeting, Scotia Global Asset Management’s portfolio managers emphasized that while oil continues to be required through the energy transition, it needs to be produced responsibly. Furthermore, they encouraged the company to continue to invest in carbon capture technology and alternative non-fossil fuels to both reduce the emissions and carbon footprint of their business, as well as to assist in reducing emissions from other sectors.
We take engagement with the companies in which we invest very seriously. It’s about planting seeds and sustaining pressure, to have an influence on significant real-world problems and effect change over time.
Plastic waste reduction
Plastic waste has become one of the biggest issues of this decade, with the United Nations Environment Programme reporting that use of the non-degradable material has ballooned in the past couple of decades, rising exponentially to about 400 million tons per year — a figure set to double by 2040. The dire situation prompted 175 nations at a UN Environment Assembly in Nairobi, Kenya, in March, to endorse a landmark agreement to forge a global, legally binding treaty to address this issue through its full lifecycle from source to sea by 2024. full lifecycle from source to sea by 2024.
It’s a complex issue, Scotia Global Asset Management acknowledges in its Stewardship report. While consumer brands are striving to meet consumers expectations for recycled content in packaging, there remains a lack of high-quality recycled content at reasonable prices. “To meet the gap in availability, recycling technology must innovate to provide higher-quality recycled plastic. It will also be important for consumer companies to be a part of the solution by considering full-cycle waste concerns when designing products and packaging,” the report notes.
Another part of the equation is the research private waste management companies are doing to increase their ability to recycle more types of plastics. However, these companies are finding that the costs of building large-scale facilities and investing in state-of-the-art technology are hard to recoup. Some of those costs are being shared by municipalities, and consumer brands are increasingly willing to pay more for recycled content to meet consumer expectations, but capital investment is needed, the Scotia Global Asset Management report says.
Last year, Scotia Global Asset Management encouraged North America’s largest waste management companies to build their recycling capacity where it made economic sense, with offers to provide capital for such projects. “We continue to stay on top of these trends and are ready to provide the funding when there are attractive investment opportunities in waste management companies to build new capacity,” the report says.
Read the full report here.
