Overview

Launched in 2020, the SIP is the fruit of close collaboration between the John Molson School of Business and Manulife Investment Management (MIM). As a global leader in sustainable investing, MIM’s vision fit closely with Concordia’s aspiration to deliver a next-generation education that’s connected, transformative, and fit for the times. Under the supervision of the SIP director and senior members of MIM, the selected students will have the opportunity to manage a $2 million-dollar virtual equity fund allocated by MIM with the explicit mandate of integrating ESG factors into the stock selection process.

Sustainable or responsible investing was a “fringe” concept adopted by a few mutual funds in the early 1980s. Today, sustainable investing has transformed the investment industry in ways that were unforeseeable even a few years ago. Today, there are thousands of mutual and exchange-traded funds applying some variant of sustainable investing, often referred to as an investment approach that integrates environmental, social & governance (ESG) risks & opportunities into the investment strategy.

Sustainable investing mandates are now widely sought by public pension funds, retirement plans, sovereign wealth funds, private equity funds, universities, foundations, and other asset owners. Most Wall Street and Bay Street firms now offer sustainable financial products to their retail and institutional clients. During the past decade, sustainable assets under management have grown twice as fast as conventional assets under management, and approximately 25% of investments in the US are now subject to some form of sustainable investing mandate. That amounts to $12 trillion under management in the United States and $2.1 trillion in Canada alone, according to the Global Sustainable Investment Alliance’s 2018 report. In total, GSIA estimated that there are $30 trillion under management globally in 2018.

Not only has the industry expanded in scale but also in scope, undergoing an evolution in its investment approach that has taken it from negative to positive screening and ultimately to full integration of ESG factors in the investment process.

Investment Philosophy

Vision

To demonstrate the superiority of sustainable investing as an investment philosophy

Mission

To provide a select group of John Molson students with hands-on experience in managing a global equity portfolio with a sustainable investing mandate and to prepare them to join the next generation of investment professionals who have an appreciation of the challenges and opportunities presented by environmental, social and governance issues, with an emphasis on the transition to a low carbon economy. We aspire for this program to be a model that can be adopted and implemented by universities across the world.

Goal

The goal of the portfolio is to invest in companies that have a long runway for growth while incorporating a philosophy of sustainability into their core operations. The portfolio will prioritize industry leaders that work towards the transition to a low carbon economy while outperforming their peers in environmental, social, and governance factors and demonstrating strong financial performance. The portfolio will also prioritize companies that focus on solving emerging challenges (e.g. climate change, social inequality, diversity, etc.), as well as companies that are working towards meeting the UN’s Sustainable Development Goals (SDGs). Ideally, our portfolio would outperform its benchmark on an impact basis.

Definition of a Sustainable Company

A sustainable company is one that recognizes the environmental and socio-economic changes the world is undergoing and positions itself to thrive in a changing world. Our ideal company views itself as a climate-aware future maker, not a future taker. A sustainable company not only provides a product or service that is needed and wanted in society but does so in a way that is fair and equitable to all stakeholders involved. These companies therefore comprehend the risks and opportunities of integrating ESG factors into their long-term operations. A sustainable company should also adopt transparent best-in class disclosure frameworks.

Environmental Factors

Strong environmental performance includes clear reporting on carbon emissions, waste, and water usage and having a clear plan for achieving carbon neutrality or even net negative carbon emissions in alignment with the transition to a low-carbon economy using science-based-targets. Depending on the sector, this can include the use of innovative alternative energy sources such as renewable energy, offsetting emissions, creating products/services aligned with the transition, investing in new sustainable R&D, and allocating capital to more sustainable endeavors.

Social Factors

Strong social performance includes solving problems for stakeholders, promoting a positive work culture, and avoiding negative externalities. It ought to focus on creating meaningful lives for their employees by providing safety, development, and support. From a social aspect, an outstanding firm should aim to benefit the communities in which it operates and positively engage with all its stakeholders.

Governance Factors

Strong governance practices include aligning management and board interests with all stakeholders, accurate and transparent reporting practices in regards to both sustainability and financial performance, board independence, valuing board and employee diversity, compensation tied to relevant KPIs, avoiding public controversy, and having strong board participation.