ESG Advisory Service ESG Investing: Opportunities and Challenges—2022

Environmental, social and governance (ESG) investing principles are not new to the financial services industry. ESG investing acolytes have been arguing for the better part of 30 years that adhering to ESG principles when deploying investment capital is both important and “good business”. Until recently, however, the uptake of ESG-themed investment funds available on retail shelves has been sporadic and uneven. Then, virtually overnight, the arrival of the COVID-19 pandemic in March 2020 triggered a tectonic shift in retail investor and advisor attitude towards ESG investing. What was niche before was now mainstream.

The current report—the inaugural issue of the ISS Market Intelligence Canada (Investor Economics) ESG Advisory Service—launches our exploration of the retail world of ESG investing in Canada and around the world. As many topics today, ESG investing is a global concern, and ideas and strategies move swiftly across the jurisdictions and markets. To monitor the global progress, throughout this report and in future issues, we leverage our vast data, research and thought leadership capital at ISS Market Intelligence and ISS ESG.

The aim of the first issue of ISS Market Intelligence Canada ESG Advisory Service is to provide evidence to assist financial services providers in answering practical questions as they consider incorporating ESG factors into their investment process, as well as into their product development, distribution strategy, wholesaling and marketing processes. To set the stage for future updates, the current report addresses a wide range of topics related to ESG investing, including demand factors, investment performance, risk management, business retention, fees, sub-advisory, wholesaling considerations and best practices in ESG retail investing.