The Canadian Equity - ESG Exclusions strategy seeks to provide significant long-term capital appreciation through investment primarily in equity securities of Canadian corporations that meet a defined set of Environmental, Social, and Governance (ESG) criteria. The strategy is managed by a research-intensive, bottom-up investment process, complemented by the use of proprietary tools.
The strategy excludes investments in businesses involved in the areas of alcohol, gambling, weapons, adult entertainment, cannabis, and tobacco, and issuers based on ESG controversies and on Sustainalytics' ESG Risk Rating. The PH&N Canadian Equity team integrates material ESG factors into its investment decisions.1
- Experienced team of sector specialists led by two portfolio managers
- Core large cap Canadian equity portfolio, complemented by small cap stocks and dedicated gold stock management
- Emphasis on identifying companies creating long-term value through quality growth opportunities
- Proprietary fundamental research is the key to security selection
- The team integrates material ESG factors into its investment decisions
- Excludes investments in businesses involved in alcohol, gambling, weapons, adult entertainment, cannabis, and tobacco
- Excludes investments in issuers based on ESG controversies
- Excludes investments in issuers based on Sustainalytics' ESG Risk Rating
The intention of the strategy is to provide long-term capital appreciation through investment primarily in equity securities of Canadian corporations that meet a defined set of ESG-related criteria.
The strategy's investment process begins by screening companies using ESG exclusion criteria that determine its investable universe. RBC Global Asset Management (RBC GAM) has partnered with Sustainalytics to implement the ESG exclusion criteria and to identify issuers for the strategy’s exclusion list.
Based on its data, Sustainalytics prepares an exclusion list of issuers. The list excludes securities of issuers that: (i) derive revenues in excess of certain revenue thresholds from alcohol, gambling, weapons, adult entertainment, cannabis, and tobacco; (ii) are involved in ESG controversies exceeding certain thresholds; or (iii) meet specific relative scoring criteria based on Sustainalytics’ ESG Risk Rating.2
Investment philosophy and style
- Growth at a responsible price (GARP) strategy
- Integrates material ESG factors in investment decisions
- Bottom-up, fundamental research is focused on the belief that high-quality businesses outperform through proven management, sustainable competitive advantages, and attractive capital allocation.
- The team thinks in scenarios, not a specific right answer. Outcomes are inherently uncertain and the processes anticipate uncertainty and incorporate buy triggers to take advantage of volatility.
- Through their various proprietary tools, the team ranks every company in the index on Quality, Return, and Conviction drivers.
- Issuers that do not meet the ESG exclusion criteria are removed from investable universe. From there, approximately two-thirds of the portfolio is made up of the highest quality/conviction ideas, while the rest of the portfolio comes together from a risk management perspective to ensure that the strategy is not taking any unintended sector or style exposures.
- As a result, the highest conviction investment ideas are expected to have the largest impact on performance, and unwanted risks are accurately measured and carefully managed.
- The team integrates material ESG factors into investment decisions. The team engages with companies’ management and boards to better understand potential material ESG risks and opportunities, as well as the underlying processes the companies have in place to manage these risks and opportunities.