According to new data from the 2023 Canadian Responsible Investment (RI) Trends Report, responsible investment is increasingly becoming table stakes for investors, and investment organizations are integrating RI approaches more fully. The proportion of RI asset under management among all Canadian professionally managed assets increased by two points to 49 per cent last year.
Serving as the primary liquidity provider to credit unions in Canada, Central 1 is leading the charge toward a sustainable investment future, which benefits our clients, their customers and arguably society overall.
Understanding responsible investment
Responsible investment goes well beyond buying green, social, or sustainability bonds. It’s an investing approach that considers environmental, social and governance (ESG) factors alongside the market’s long-term financial health.
Investors increasingly opt for this approach, guided by the belief that long-term sustainable growth is created by a well-governed network where environmental, social and economic systems work together as one. According to the Responsible Investment Association report, greenhouse gas (GHG) emissions are the most common ESG factor considered in investment decisions, followed by board diversity and inclusion, and climate change mitigation.
Why ESG matters
Let’s break down what’s involved in ESG:
- Environmental: How does a company prioritize work to improve or mitigate its impact on the environment? This includes sustainability practices, waste, pollution levels and greenhouse gas emissions.
- Social: How does a company treat its people and community? Working conditions, recruitment inclusion, diversity and impact on local communities are some of the factors considered.
- Governance: How does a company engage in sustainable corporate governance practices? This area includes executive and employee compensation, board and management structure, diversity and tax strategy, among many other factors.
All corporations, including financial institutions, are encountering shifting attitudes and priorities amongst their stakeholders, customers and communities. Increasingly, companies are expected to behave according to higher social standards, with a growing demand for transparency and disclosure of ESG information.
Organizations who incorporate ESG into their corporate strategies and practices appear to have a lower cost of capital, deliver higher shareholder value, and experience fewer negative surprises in the market. Conversely, companies who do not consider ESG factors as part of how they do business can find themselves at a disadvantage compared to competitors.
Central 1’s responsible investment approach
Through ESG analysis, screenings and integration strategies, Central 1 strategically directs funds into securities and companies prioritizing sustainability, leveraging deposits from credit unions. Moreover, Central 1 promotes an ESG-only investment framework and mandate to credit unions clients through our asset management offerings. We’re focused on increasing our holdings in green, sustainable and social impact investments, with 16 per cent of our investments allocated to this focus area in 2023.
In 2018, Central 1 became a signatory of the United Nations-supported Principles for Responsible Investment (UN PRI) — a global voluntary sustainability initiative led by more than 5,300 corporate signatories from 135 countries. With this commitment, we report our responsible investment activities on an annual basis. In the 2023 annual assessment, Central 1 achieved a score of over 70 per cent across all categories, surpassing the average score by more than 15 per cent in three categories.
Learn more about our responsible investment activities and performance: Central 1 receives global recognition for its commitment to responsible investment – Central 1 Credit Union
Need more information on responsible investment? Please contact responsible-investment@central1.com
