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We are joined by Fate Saghir, Head of Sustainable Investing and Natasha Stromberg, Director of Sustainable Advocacy and Stewardship, for Mackenzie Investments. They discuss sustainable investing in Canada, carbon pricing and the role of carbon markets and investing with a gender lens.
Welcome to the Sustainable Finance Guernsey podcast page.
Guernsey Finance is a joint government and industry initiative tasked with promoting and connecting Guernsey as a leading international finance centre.
Named as one of the Green Finance Guide's top 10 must-listen sustainable finance podcasts, our broadcasts feature news, insights and discussion about green and sustainable finance, and the contribution which Guernsey, as a global leader in green finance, is making in this space.
Rosie 0:00
Hello and welcome to the latest Guernsey green finance podcast which is rated one of the top 10 most useful, sustainable finance podcasts by green finance guide. Guernsey is one of the jurisdictions leading the way in green and sustainable finance. And as part of this podcast series, we will be speaking to and learning from some of the leading global figures in the field. My name is Rosie Allsopp. I'm Director of Communications at We Are Guernsey, that's the promotional agency for guernsey's finance industry. Today, I'm delighted to be speaking to Fate Saghir who is Head of sustainable investing at Mackenzie Investments. And Natasha Stromberg, who's Director of Sustainable Advocacy and Stewardship at Mackenzie Investments. Welcome to both of you.
Fate 0:49
Thank you, Rosie.
Rosie 0:50
Now, Fate and Natasha, I'd like to start by introducing you both to our listeners, and how did you end up working in this area of green finance? And it would be great if you could tell us a little bit of your personal backstory. Can we start with Fate, please?
Fate 1:08
Sure. Thank you. And I think Natasha and I are both very excited to be with you today. So for for me, sustainable finance and green finance has been it's an a newer area for me, although I think I've been preparing for this my whole career. I'm an accountant by education. And I've spent the better part of my career really focused on building new business areas leading new initiatives and more of transformative nature for for my current employer and even select some of the employers that I had the opportunity to work with in the past. What's interesting is I started my career in construction materials for a well known company that's Lafarge, they're out of Paris. And now I believe they've merged with the wholesome. And so I started as an analyst, and one of my first projects in Toronto was to add an environmental fee to each load of our concrete. So I had to work with our dispatch system, it was kind of like a little bit of a big deal. Sorry. And I remember we started with $1. And then we realized, oh, my gosh, we need a bit more money to clean out our, our concrete drums, and so on. And so that went on to three, and I'm not sure what it's at now. But it's interesting, just the the parallels right between that one of the first initiatives I led in my professional career. And what I do today, I've been at Mackenzie for about five years now, will be five years in February. And I really feel like this is you know, as you progress in your career, it's wonderful when you can, you know, every organization you work for, you find much more much more closer and tighter alignment with your own personal values. And I really believe that's for Mackenzie and our parent company IGM Financial at that step. So what it's been for me. And so in, you know, I've held a number of roles, this is my third role in the organization. My initial role was really focused on research, a client experience, data and analytics. And then I moved into a role, which was fairly new for us building out our innovation, and market strategy functions. So I did that for a couple of years. And, and as I was, you know, working through that, I was involved in the framing of what are the focus areas that we needed as an organization to ensure that, you know, we were we were successful, we existed 5,10,15 years out, but also that we were meeting on the demands of our investors. And so you know, in, in, in 2019, we, we were like, nope, this absolutely needs to be a big focus, we're going to bring on a leader to, to help lead it and build it for us. And so, you know, when that happens, I'd whisper to my CEO, I'm like, I would love to do this, because I had, you know, helped to kind of frame it I was already involved in, in much of the work and with the some of the ESG ratings providers, and just some of the investor research we were doing. So I'm very much excited to have had the opportunity to have the opportunity to build and lead this for us. And, you know, in in I know, you're seeing this, you know, across Europe, it's fairly newer in North America, right? Both I think maybe even in the US, it's, they're a little bit further ahead than than Canada. But this is truly transformational, and in the fact that now, we're asking organisations to not just focus on their shareholders, but also to expand their their focus to multi stakeholder model and to really think about the long term and what their actions today and how their actions today impact the future for those stakeholders. So we see it as quite transformational and as I mentioned, I'm really excited to lead this there's there's so much work We have to do in this industry, which I'm sure we'll all get to a little bit later in the podcast.
Rosie 5:05
I'm sure we will. Thank you for that. Natasha, how about you?
Natasha 5:09
So my roots into green finance really came through regulation. And I joined the UK regulator, the FSA, as it was then back in 2010, of the financial crisis. And I was part of the task force on commodity derivatives. And that's when I really started to see the effect of global finance on the real economy. And, you know, particularly in areas such as oil and metals, and I was the supervisor of the London Metal Exchange. And that's really where the rubber hits the road with finance and the real economy. We're looking at the type of metals that are traded, such as cobalt, and cobalt, is a metal that is sourced, as you probably know, from the Congo, it's in all of our electronics. But there are issues in the supply chain, not least human rights issues, but also environmental issues. And I started to get extremely interested in this I thought, this is where I want my career to go. I worked a lot with European regulation, again, saw the impact of how regulation drives the finance industry, this is particularly in Europe, and we're going to come to that later on in the podcast. So ever since then, I have through roles in regulatory affairs, I've just been pivoting my career much like fate, towards sustainability, very interested not only in the environmental impacts of finance, but also the social impacts of finance. And, like faith, I can see my career and you know, continuing in sustainable finance from here on in.
Rosie 6:51
That's really good to know and thanks for such a great introduction. Both of you are fascinating backstories you have. And I would also like to say on our podcast, we've spoken to lots of people who are based in UK and US, but I'm thrilled to welcome you as our first Canadian guests. Fate, can you give our listeners a quick introduction to how sustainable investing is understood in Canada? Because I think you alluded earlier to the fact it's it's a slightly different picture from everywhere else.
Fate 7:21
Yeah, that's, that's right, Rosie. So a couple of things, a sustainable investing more broadly, is actually quite common in Canada, specifically, around with with institutional investors, and even with within the industry itself. So I say, you know, the, the, you know, two kind of areas or approaches that I'd focus on. And if you have had the opportunity to review the global sustainable investment review, you'd see that Canadian asset managers and owners are amongst the highest in integrating material ESG risks, and also amongst the highest in their active ownership approaches. So their stewardship strategies, how they leverage proxy voting to make a difference. So in Canada, it makes up about 60% of the total assets, which again, I believe, is amongst the highest of all the countries that that report, sorry, all the jurisdictions that report to the GSI arc, I think the reason for that is, you know, Canadian, the Canadian economy is so heavily reliant on the resource sectors. And I think there's a recognition that, you know, what we, we see this global movement happening around us, and so that, that focus on managing risk, specifically, you know, climate risk, you know, whether it's, you know, physical or transition, and then engaging with the companies and investments that we hold in our portfolios is, is so critical and important. So some of the things, you know, when, when RPMs or when our team is engaging with, with companies, we make sure that they understand what's happening around the globe, and the implication that that might have on on the, you know, our export business, outside of our borders. So, so in and so that we consider, you know, ESG integration and stewardship as basically, you know, table stakes in Canada, where we start to see, you know, much more of a new kind of investor demand coming in the sustainable solutions or products. So this is, you know, primarily like in Europe, I define it as Article Nine and maybe you're touching on Article eight, but this is where in the investment objective, you will you actually have prioritized ESG and you're looking beyond just delivering the traditional risk return objectives to the investor. You're also looking at delivering on some sustainability objectives as well. That is still in in Canada today. It's about 30% of sorry, $30 billion in assets. So still quite small but growing, growing, I say exponentially year over year. You know, one of the things we we still struggle with, especially, again, very, very well known in the institutional space, if we go into the retail investor space, we still see there's a gap in investors desire and the demand we're seeing from, you know, the average Canadian saying, Oh, my gosh, you know, I didn't really trust the financial industry, especially post 2007, 2008. But now I'm seeing this movement where I can actually invest with my values, we're seeing a lot of investor demand and Canadians want to be there, we're we're finding challenges is now we have to get in front of advisors, retail advisors, and train them on, you know, what this means how to position it, how it affects the, you know, some of the compliance requirements that advisors have, such as, you know, know, your product, or know, your know, your clients. So there's, there's a number of things we need to work out there. And then what we also find in the, the retail space, in Canada, is there still a high sensitivity to performance? And and you'll find, you know, it's that's where, and I think that that comes with the broker aspect of the business, right. So I, as an advisor, add value to my client by ensuring that I'm able to get them the best returns possible. And so that tends to be a little bit, you know, short term focused and oriented, which I think doesn't do this space, a lot of service. So we're doing some work on education and awareness, you know, beyond Mackenzie, as an industry to ensure that, you know, both advisors and investors know exactly what they're getting into when they're investing with more of an impact lens. I hope that that that Rosie, was that sufficient in terms of an overview?
Rosie 11:51
oh I think that's a magnificent overview. Thank you very much. Indeed. I've just scribbling notes while you're talking. Now, I think the more eagle-eyed of our listeners will recognize that Natasha doesn't sound Canadian. I understand you've recently moved to Canada. Is that correct? Natasha?
Natasha 12:11
Yes that's right, Rosie.
Rosie 12:13
I'm sorry, I was gonna say and how does the Canadian perspective differ to the European one that you're used to?
Natasha 12:21
Yeah, yeah, I'm happy to answer both of those questions. I've been in Canada now for about 18 months, I'm a pandemic immigrant, just wanted to squeeze under the wire before COVID hit. And so it's been a very interesting experience, but also a brilliant.
Rosie 12:38
I bet.
Natasha 12:40
I mean, you know, there's a very close relationship between Canada and particularly the UK, you know, we share a language, we also share a head of state, so many of the things here in life are very familiar to me. But the market is different. And fate, you know, hit the nail on the head here, Canada is a resource economy, it's very similar to Australia in that respect. And it isn't just a country, it's really a vast continent is part of an extremely resource rich North American continent. And in Europe, obviously, we all felt the same way. But the Europeans, I still count myself as a European. And, you know, we are consumers of oil, we are consumers of metals, you know, we don't produce a lot of this stuff. Obviously, I take Norway, in Norway is different, you know, as a massive oil producer and UK in the past, but it's North Sea oil fields. But you know, Canda is a producer of metals, oil, and Europe is a consumer of those products. So I think that's the key. The key difference to realize, so we are dealing with when we talk about decarbonisation of industry, in Canada, that is very real, and the transition to a low carbon economy has a lot of effects, you know, on the industrial base, that's jobs, and, you know, out west with with the oil sands and the mining, so I think just being cognizant of that producer economy, you know, that is is key, really when we talk about sustainable investing, and also, you know, to Fate's point about the regulatory environment is different here. What we've seen in Europe, and I'm talking about the EU here, is, you know, regulation, really driving capital into sustainable finance. And that's very deliberate. The EU has a 30 year plan or you know, launched its 30 year planning 2019 to move this the finance and you know, the finance industry to sustainable finance very, very clear objective and has put in vast amounts of legislation to do that, in Canada regulation is actually undertaken at a provincial level. And that's something that I mean, I knew that because I was a regulator I dealt with Canadian regulators before. But to your listeners, I think it's worth saying that Canada is a sum of huge provinces. You know, it's not just one country and the provinces have their own governments and their, you know, and their own political persuasions and objectives. So I think that's a big difference as well. So we, you know, we don't see regulation driving sustainable finance as much as we do in Europe. And we are a resource economies that brings its own challenges.
Rosie 15:47
That's really interesting, what you're saying there about, it's not that sort of blanket, regulatory landscape with each province having their own, you know, set of standards.
Fate, Could you outline for listeners, what sustainable investing looks like in practice? And perhaps tell us about the investment funds that you're working on at Mackenzie?
Fate 16:15
Yes, I'd love to and maybe just before that, Rosie, to add to Natasha's points, we actually are we only make up 2% of the global emissions in Canada. But I was presenting to a number of our clients earlier this week, and I said, but were amongst the highest emitters on a per capita basis, I think we definitely even beat the US. So. So that's something triggered everyone's everyone's life dead, like, Okay, so the 2% is not the number we should be going after it should be, we should be going after the 15 tonnes of co2 per per capita per year. Anyway, it's just very, very interesting. And we hope we hope we do make progress over the coming year or two.
Rosie 17:03
That is a fascinating statistic. Wow. So do you continue?
Fate 17:07
Yeah, so just on on what sustainable investing means to us and and how you put it in, in practice. So when, you know, we, we were very aware of the traditional kind of the traditional definitions of sustainable investing. And what we wanted to do is we really, because our firm is very much focused on the end investor and the retail space, we do have quite a significant institutional business, as well. But from a from a communication perspective, we do focus on the end investor. And so we we took the definition, you know, one, we went kind of one level up, and we said, you know, what sustainable investing to us is about valuing progressive corporate behavior and action. And really ensuring that the companies that we're investing in respect their environmental and social effects of the products and services that they bring to the market. And so we hold ourselves accountable to that definition, as well. And this is something that is now being communicated across our investment funds and ETFs to ensure that, you know, the companies we're investing in, again, are aware of, of what progressive corporate behavior and these means to us. In practice, there's, you know, a number of things that we focus on. So we have, what Natasha is leading for, for us is supporting our stewardship activities and building that out across we have 17 investment boutiques, each that have a, you know, diverse philosophy and focus area. And so Natasha's trying to work across all of them to ensure that our stewardship strategy is effective. And we tend to focus more on stewardship and less on divestment again, for all the, you know, reasons that Natasha has indicated in terms of the Canadian economy and how we're, we're, where we get our value. today. I'm also have a group that's focused purely on ESG research and, and insights. And this group as well works across all 17 of our boutiques, to provide support in terms of how to translate data, how to understand the data is, as you know, it, we struggle with the same things, we're all using the same ESG data providers. So there's a lot of nuances in the data. There's a lot of data imputation and methodologies that are that continue to emerge. So we have a team that focuses on working across our boutiques to ensure that we understand in a consistent manner what what these data, risks and opportunities bring us. And then on the sustainable solution side. So this is again, where we focus on investment funds and ETFs that have a sustainability objective. We have a small team there that helps to develop products and also bring products to the market. So a couple of the products that we we've developed in you know, since since I've joined and moved into this role is we We are really big on environmental, thematic investing. And last year, we acquired a small boutique that was based in Toronto called queenship financial, and this boutique has been around since 2007. This this company focused really on environmental thematic investing, they, you know, got a list of about 1000 companies that they track, and you know, they evaluate their their a company's revenue, green revenue alignment, and then build a portfolio based on that we've got a couple of portfolios that the or strategies that the team is managing now, one is our green ship environmental, global all cap fund, that one has about 4040 Holdings, all companies that again, are focused on delivering for the transition. So you'll find solar manufacturers and wind farm manufacturers in that strategy, we also created a Balanced fund version of that same strategy, and that one also has a green bond, global green bond sleeve in it as well, that's, you know, I believe we're at about 75%, green label debt. So it's, you know, if you want to make an impact, if you're focused on climate change, that's probably where you're going to get the most impact. Then earlier this year, we we developed, hired a new manager and built out a new boutique that's called our Better World boutique, this boutique takes more of a, a modern approach to ESG investing. And so you know, they have a list of industries that they exclude from their strategies, and then they they really focus on companies that are best in class within their respective industries. And then, but really have a very strong approach to stewardship, and, and proxy voting. So we're really proud of the capabilities that this boutique has, has brought to our company. And one of the things that, you know, we were really focused on, and why we chose to have these boutiques that are really pioneers in the space. So the gentleman that leads or better world boutique, Andrew Simpson, he's been doing sustainable investing for, you know, over 10 years, and I'd say probably the better part of his 20 year career in this space as or as a PM, I love that we don't have to struggle with them on how to be sustainable, it's just part of their DNA. Right. So for us having investment teams that just do this, not because they're getting paid for it, you know, not not for any other reason, not for the profile, but they were doing it when nobody else was doing it. Right. And, and I love that. And I feel like it's something that really helped to authenticate our position in the Canadian market, actually agreed shift fund is quite popular in the European market as well. So we've got a number of opportunities there. But it's really like, it's, it's not that we're not taking a traditional manager that was trading oil and gas last year, right and telling them to build out a an environmental fund, that was something that's that was very important for us in our strategy. So, you know, we're really proud of what these two kind of more pure play boutiques are able to deliver. We have a couple of other boutiques were, you know, that are much more quant oriented, where we can work with them and, you know, set the parameters. They're not fundamental manager, so it's a little bit easier for us to kind of provide the constraints. So you know, we have a, an emerging market strategy that we're, we're also planning to Brandon in Europe. And you know, there it's we work very closely and Natasha has actually been involved in this very closely with the pm on what what are some of the constraints that we need to apply? So, you know, we'll we'll work with them to help with with the outcomes and we'll ensure that we're, you know, we're meeting some of the evolving regulations in Europe, but I'd say like the the pure play of sustainable solutions is, is really what what I'm proud of and what we've been able to deliver here.
Rosie 24:07
I can hear the enthusiasm in your voice and it just it sounds so great to have that sort of authenticity behind what you do. So I don't know if you're aware that Guernsey Finance/ We Are Guernsey recently held our annual sustainable finance week which explores you know, key sustainable finance developments in core financial services industries, both private equity, private wealth family office and the insurance industry. And many of the speakers who came and spoke at our event agreed that regulations and policy are increasingly an important focus for institutional investors. So Natasha, I'd like to ask you what your views are, on how different types of investors and managers are considering upcoming regulations. Do you think it's just a business risk for them to comply with upcoming mandatory reporting?
Natasha 24:59
Well, first Let me say that congratulations on to Guernsey on your annual sustainable finance week, which I thought it was a fantastic event. And I'm sure you're going to build on that and keep building on guernseys reputation as a leader in green finance. And I have to say, personally, I learned a lot about regulation, even though it's a core interest of mine. Anyway. You had some good speakers, I think, you know, and then there was issues of disgust around, you know, divestment versus stewardship, which which phases also alluded to, you know, the risks around divestment. I thought those were all very, very interesting points. And But to answer your question on whether I think regulation is seen as a business risk, and I think it's, I think it's more than that, I think what we're seeing is regulation, creating a new marketplace, and that for investors, it's reshaping the ecosystem, and it creates business opportunities. And people are seeing that, you know, the finance industry is moving towards sustainability. And, and if I look at something like private equity, I mean, a lot of these companies that are going to provide the solutions to, you know, the energy transition will start in private companies before they float. So, you know, I think players in the private equity space are very interested to see what the regulations do, because they know that that's where they will put their capital now and in the future to fund these companies that are going to grow that we need, and for the energy transition. So I think it's, you know, regulation always, you know, creates opportunity, if you're nimble enough, and, you know, to keep up with it. And I think, in the private wealth sector, you know, we are seeing this huge wealth now, that has been created in the last 20 years, you know, in the tech space, private wealth, and, and I think that new generation of wealth wants its money to do good. And I think we're going to see a lot of private wealth and family office money, you know, demanding sustainable solutions, they are that generation now. And, and also, you know, the generation that's going to inherit the baby boomer wealth, you know, they're millennials, and I think, you know, they grew up with sustainability, and their values are, and we want our money to do good. So I think it's not just the case of, you know, complying with mandatory reporting, it's a complete shift of the financial ecosystem. You know, we all know that, you know, to be a sustainable business, you know, you have to be you have to comply with regulations, a well regulated market creates opportunity, I've always believed that. And I think what is happening in the EU is creating vast amounts of opportunity. And not just a business risk. So, you know, I'm, I've always been pretty bullish on well regulated markets, creating opportunity. And, and, and, you know, I think smart money is coming into the sustainable investing space, you know, just at a warp speed rally.
Rosie 28:39
I would absolutely agree with you that it's more than that. And it's it is reshaping the landscape. And also, with this younger generation coming through with that financial clout, they're the ones who really, you know, are living with the effects of climate change. I just move on fate, you work with many retail investors as well as the larger institutional investors? What, in your view of the drivers for those retail investors? And are they different to institutional investors?
Fate 29:13
Sorry, just to add on to Natasha's comments and, your comments, today, they are different, but I do think they will change with this, the newer generations coming in being much more value oriented, right, seeing what's happening around them, you know, the climate physical risks and, you know, in Canada, BC, which is on on the West Coast, it's
Rosie 29:39
I know BC, yeah, it is seeing it.
Fate 29:42
Yes, awful, what has just the number of catastrophes that has happened there in the last year alone, you know, from fires to flooding to just severe storms? I mean, you know, you see, you see the world around you being impacted by this. And then there's a there's a fine The actual implication to that right, so we see his economy is going to be hit, you know, significantly in the coming months. So, you know, I think it's, it's, I hope, you know, I'm gonna speak to the retail investor today, but I hope we see that changing in the coming years and generations. So we find that, you know, in in Canada, and and I'm not sure if it's the end investor, or if it's how retail advisors position solutions, but they do tend to be much more short term oriented in with institutional investors, right, you're managing pension plans, you've got much more of a long term, time horizon. on the retail side, I think often there's a sense that as an advisor, I have to, you know, generate value, I have to keep my clients, you know, happy I didn't burn that is it showing that you're, you're delivering on the risk return profile that you've committed to your investor. And so there is a big knowledge gap on on the performance versus impact. And the challenges with when when you are a bit more short term oriented. So you're not thinking about the long term stakeholder or you're not thinking about, you know, the implications of your activities today that those might have on the environment, right, you're chasing the stock market, which, as we all know, is quite emotional. And is, it probably not not not a best practice. And I think the last decade has proven that, you know, time and time again, what we do see is, you know, saying that, but I do think there's a demand from a retail investor side that's starting to emerge, the, by the end of 2020, mutual fund assets in sustainable funds grew by 55%, relative to the 11% that we saw in the traditional fund space. So I mean, those are big growth numbers. Anyway, I think we all saw a lot of a lot of investments coming into a lot of capital coming into our space. But, you know, that's like a five times the growth, which is wonderful. Today, it's about 30 billion in assets, and it's continuing to grow. You know, two years ago, when I came into this role, it was just $12 billion dollars. And I remember, just quite small, right, Canada's about a four and a half now four and a half trillion dollar industry. So when I, when I took the role, I'm sure many of my colleagues were like, what we're focusing on this 30 billion in the grand scheme of things is not massive, but the growth rate is, is incredible. And we want to grow this space. You know, I say to many of our peers, our competitors, I said, at this point, we all need to bind together and focus on growing the size of this pie, we need to bring more capital into the space, you know, we can't be competing against against each other right now. Because we have to bind together and provide the education and the much needed awareness for the importance that investors can bring in allocating capital to mutual funds and ETFs that are actually driving the change and supporting the the energy transition. So there's a bit more work that we need to do it with both retail investors and advisors in terms of education, but it but it's moving in the right direction. And we're really excited to be part of that journey.
Rosie 33:31
That's great to hear that it's moving in the right direction. And now you are both probably well aware of the recent COP26 event that took place in Glasgow, we were very lucky. Our green finance manager, Stephanie Glover and our green and sustainable finance strategic adviser Josephine Bush, but able to attend. And their feedback from that was that people working across the finance sector they spoke to, it's the first time that they attended and it really felt like this cop was it's been been dubbed the finance cop, where industries really engaged in creating momentum for sustainable investing. Natasha, do you feel that this cops galvanized the finance industry? And I'd also like to know what you're expecting in terms of tangible action plans from the finance industry on the back of coal?
Natasha 34:24
Yes, I think for me, COP was perhaps the culmination of a lot of work that has been happening private, sorry, prior to the actual meeting in the finance sector. And but I think what what cop actually did was show and publicly commit the financial system to net zero and I think that's important. It was a public statement of the financial industry is now driving towards net zero and we're on that path and that's where we're going by by 2050 I mean, just some numbers around that when Italy and UK took over COP there was 5 trillion allocated $5 trillion allocated to the net zero economy. And now it's 130 trillion of private capital committed to transforming the economy to net zero. So I mean, that's immense, we are seeing the massive capital flows into net zero. So I think I think that's the baseline. And I think what cop really did was bring private finance into the game, we know, we can't transform our economies. I mean, we've been working off a fossil fuel based industrial base, you know, for for a couple of 100 years now, you know, we can't publicly finance the transition in a very short space of time. So I think what cop did was was really say, look, to the private though, you know, the investors of private capital, we need your help, and you are going to be central to that transition. And also what I think what I expecting in terms of tangible action plans, I think we're going to see some of the more I hate to call it boring stuff. But we're going to see, you know, a lot of work behind the scenes to get the reporting done. I'm I'm a big fan of disclosure, I think the creation of the Sustainable international sustainable standards boards, which was announced that cop is going to be key in terms of global reporting of climate and sustainability standards. That sounds quite a dry subject. But, you know, they will say, you know, what gets what gets measured gets managed. And that's true, we, we need to move to a different type of reporting. We're not just saying, Oh, this is how much, you know, profit, we may say, we're going to move to a system of financial reporting is to say, this is how we made our profit and company value will be will be judged on that basis, how not just how much money did you make, but how did you make that profit? And I think something like the setting up of the stabilities international sustainability standards board is is a tangible action plan to get us to that point. And also the commitment, you know, of capital flows to emerging and developing economies. You know, it hasn't been, it hasn't been successful. So far, you know, the actual transfer of capital to help developing economies with their transition has been slow. $100 million was committed. Sorry, $100 billion was committed, but we need more. And, you know, also, good news is that the financial alliance, which is called, you know, the financial lives of banks, defense, as it's called Basco, finance, a lot of potential financial alliance, has announced that it will have a permanent secretary across the globe. And I think, again, that just shows that the financial industry is serious about doing the hard work on net zero. And so yeah, I think we're going to see activity, perhaps not as glamorous as a as a cop 26. But behind the scenes, it's going to be a lot of work to do a lot of heavy lifting come in.
Rosie 38:36
Do you think that COP delivered from a Canadian perspective?
Fate 38:43
Um, I do, I think there was a lot of commitments made. Right, there is a commitment made to and funding of unabated international fossil fuels, you know, ending before stration, Canada assign the global methane pledge. So there was there was a number of commitments made, and I know, there was, you know, a number of commitments made for, you know, the asset managers, which we were also aligned to the netzero. Asset Manager Alliance, which very few actually, few Canadian asset managers signed up for. And I say that because it's commitments have been, you're easy for us to put things down on paper. And I think now what we expect to see is I'd like to see some action. So earlier this year, the Canadian government passed a new legislation, the Canadian net zero emissions Accountability Act, to really start to hold the different government constituents accountable for delivering on our net zero emissions. It's it's sorry on our net, decarbonisation or net zero pledges. So it's, it's, I think we made a lot of commitments and we're looking forward to seeing how Canadian government is planning to meet all of these commitments. So part of this Accountability Act that was launched earlier this year, I believe it passed in June was for our Minister of Environment and Climate Change to come back and with an actual plan, and to Natasha's earlier point on the federal versus provincial government in Canada, whatever plan they put forward, I hope they will, they've aligned with all the the right, the right constituents, and we've got a path forward. So it delivered a lot of commitments. We've seen those before, we'd like to see more action. Now. We're also one of the other things we're waiting for is the sustainable finance, taxonomy. That's meant to get released by by the end of the year. So few things still up in the air that we are obviously advocating for. So if I can say to be to be to be determined, Rosie, and we can come back to it in three months when I know exactly what that action plan is going to look like. But from from a commitment perspective, yes, lots of commitments made, and I hope we're able to meet them.
Rosie 41:12
It's a real case of watch this space. Yeah. Natasha, an emerging trend at the moment is the idea behind nature based solutions to help solve the climate and diversity crisis. Is that a trend that you're seeing?
Natasha 41:27
Yeah, I mean, it's a nascent trend. I think it's worth saying, you know, at COP, just go back to COP that 130 countries have pledge or did pledge to reverse deforestation by 2030. And they those countries actually represent about 90% of the world's forests. And I don't think we can talk about climate without talking about biodiversity because they are inextricably linked. I mean
Rosie 41:55
oh absolutely.
Natasha 41:56
Forests are carbon sinks. Trees are, you know, carbon sinks. And so I think, you know, they are two sides of the same coin. For the last five years, we've seen a huge focus on climate and carbon emissions. And I think for the next five years, we're going to see the same kind of focus on biodiversity. I mean, obviously, the taskforce, the tcfd, the taskforce on climate disclosures, it has now created the taskforce on nature related financial disclosures, and they are busy, the tfnd and they are busy coming up with the framework for biodiversity disclosures. So I think, yes, absolutely. You know, the next five years, we're going to see the focus on biodiversity that we've seen on climate for the last five years, you know, there is there's less data in this area. So I think that's tricky. You know, carbon data is now you know, becoming quite mature, biodiverse biodiversity data is at the early stage. So, you know, I think, like we say, we're going to hear more and more about biodiversity, but we all know it's connected. You know, we're pretty smart. And I think we will see investors really starting, sir. Okay, you've got the clock, you've got the carbon issue, you know, kind of in your portfolios, tell me about what you're doing on deforestation, what kind of companies are you invested in? And, you know, what is their biodiversity score? And I think we're going to see a lot of rating scorings in this era. And I think, you know, it's going to be very interesting.
Rosie 43:40
Absolutely. Fate, how are carbon markets and carbon pricing affecting these emerging trends would you say?
Fate 43:49
So, I will say that the carbon pricing is absolutely essential to, to our transition. And and I want to clarify by saying global carbon pricing, we can't have one now give you an example. In Canada, we've had, you know, Carbon Tax kind of on and off from the mid 2000s. And in 2019, the government, you know, passed a carbon tax. It's so they pass this carbon tax, and I'm not a fan by the way of carbon tax. I do love the European model and model that we see. There's a agreement between Quebec in California for a carbon market I find those work a little bit a little bit better. But the carbon tax in Canada that was finally became law in 2019. It hasn't actually we don't see any reductions in our emissions. And you know, and we work very closely and we're invested in the resource sector so I'm not I'm not telling them anything they don't know or listening to this but but they just pass on that tax to to the end consumer It's so it's so easy to do that. And then And then, you know, the global aspect comes from, you know, most of our resources get exported, you know, to the US, I want to say something like 75% gets exported to the US, China is now a big partner of ours. So with those countries are not holding our industries accountable, then, you know, it's, it's, it's not, it's not going to be very effective. And that's, I think, what we're experiencing in Canada today. So I think having a global price on carbon, and having a carbon carbon markets, something like what what the, what Europe has done with their ETS system is, is absolutely where we need to get to this is, you know, just because I met in one jurisdiction doesn't mean, you know, the jurisdiction, you know, across the ocean isn't being affected by by climate change. And so I know, this was a big topic at COP 26. And hope that we we see more more progress there. You know, the other thing I'll say, just on maybe on the voluntary market, because this is something that we're looking at very closely, I, I find it and I will say horrific, when, when we see, you know, companies that have not put actions in place to actually lower the their emissions participating in the voluntary carbon market. You know, and I think where the international community is going to move to and our, our Canadian friend, Mark Carney is really, you know, helping to blaze this, this path for us is, is ensuring that companies need to try their best to reduce their emissions, and then your carbon offsets are purchased on you know, the last bit that you're really being challenged with, and might require more more investment or capital deployment, we see the same thing on the, on the investment side, we've seen a number of traditional funds, we've seen funds that track traditional indices that are filled with, you know, fossil fuel exposures, try to offset those, those emissions by buying offsets. And I just think that is not how we need to be using these. Right, you try to decarbonize your portfolio, your company, to the extent that you can and your offsets are based should be your last absolutely your last resort. So, I'm really looking forward to some of the international regulations that that will come into the space and a global pricing system is absolutely essential to decarbonizing the globe.
Rosie 47:51
Absolutely. I don't just stay with the fate. Investing with a gender lens is also a growing investment chain. I'm interested to know your thoughts on why this is and why does gender lens investing make business sense?
Fate 48:07
Oh, my goodness, now you're getting a question. We actually have so on our shelf today, we have a Women's Leadership Fund. And this Women's Leadership Fund. It's a Global Fund invests in companies that have a number of attributes. One is they need to have at least three women on their board. You know, another one is a CEO or CFO needs to be a female. It's good. It also has a number of constraints on aligning to the empowerment women's empowerment principles. You know, there's some constraints around the number of women in leadership and having a gender based diversity strategy as well. So it's, it's a wonderful fund. I'm personally invested in it. Unfortunately, these funds do not do really well in in the market. And you know, especially amongst retail investors in the Canadian market space, I want to say there's probably about five funds in that, you know, you know, our gender, gender based investing funds, and collectively we probably have under under half a million Canadian dollars in assets. And maybe that's that's probably a little bit high. I think there's been some recent redemption, redemptions the approach that I am, we're taking at Mackenzie in and I think the approach that many of our peers are taking is, this is just the right thing to do. We need to get to, you know, more diverse leadership teams, more diverse companies, because there's just so many benefits that are associated with that. In Canada alone. women still earn 24% less on average, than And then men. And you know, when there was a study that came out of the US, it was based on about 3000 companies in the US. And it saw that companies that had at least three women on the board had a 10%, higher return on equity, and 37% higher earnings per share. So the data is there, the research is there. And if it's there, then we probably don't need to do it in just one fund. This is something we'll want to do across our investments. So in going into 2022, now that we have better data, there's there's more mandatory and regulated reporting around gender and ethnic diversity metrics of a company. So we feel like we're at a point now where we can work across all the companies that were invested in to ensure that they're meeting some of some of those thresholds and that they have a diverse diversity, equity and inclusion strategy in place, so you know, for countries and jurisdictions like Canada and the US, Europe, these are really like, I'm just, it saddens me that we're not there yet. It's it's something that we've been talking about for so many years now. And I think now we're at the point where we have enough data to really start driving change us as active investors.
Rosie 51:30
And let's hope it sort of accelerates over the coming months. And now I have a final question for you both. With so many funds and companies claiming ESG credentials, how can you be mindful of greenwashing? And what do you think investors should be looking out for? Natasha, do you want to go first?
Natasha 51:50
Sure. Yeah. I mean, obviously, the phrase greenwashing strikes fear into the heart of both investors and, you know, asset managers, but I think, you know, we need to make a different differential here, you know, about intense, you know, I think there's a very big difference between a company whose intention is is to say something's green. And I don't just mean in finance here, I mean, you know, across the board to say something's green, when they actually know it's not the company that is very genuine in its ESG ambitions, and is working in an environment, which is still very new. I mean, we're talking about data that, you know, we're in a in a data ecosystem that is growing and developing and is still quite new. So I think, in terms of greenwashing, companies who are developing green products, just need to be very methodical in the way they choose their stocks, the way that they report, the data that they use, and also the transparency of disclosure. I think, really, that's what we're talking about here. It's about being transparent about what is in your investments. And and if you're transparent, then you're not greenwashing. And I think that's what investors need to be looking for. They need to be looking at products that have full disclosure on what's what's in those products. And, and keeping up to date, you know, a company that makes statements that you know, that they're up to date with the regulations. And I think that's how we deal with with this potential of greenwashing. It's about being transparent, methodical, but also accepting that, you know, some of the datasets out there, and this is across the board, not just, you know, are are beginning to come out. I mean, that's, like I said about biodiversity. There isn't a huge amount of data right now available. So I think disclosure is is key transparency, disclosure and being methodical.
Rosie 54:13
Okay, thank you. And Fate, how about you?
Fate 54:17
Yeah, I love the intent. And the ambition that Natasha touched on are so critical. I mean, obviously, looking at the investment objective, and what the strategy is, is it's so important for investors, I will say just, you know, a couple things, it's important to review the the data and the sustainability characteristics that that, you know, an asset manager might be providing. But, you know, one of the things that we struggle with and we continue to relate to our investors is there's a, there's a whole focus on decarbonisation, and how soon we can decarbonize. You know, it's a good and challenging thing at the same time. I'll give you an example. We have our green bond that I mentioned earlier, green bond fund that we have on our shelf, this green bond and we wanted to invest in industrials, materials based companies, you know, even fossil fuel companies that are issuing green bonds to help them with to help fund their transition. And so what you're gonna get from those Holdings is you're gonna get a higher carbon intensity than if you went ahead and invested with, you know, a technology company or financial services company, right, it was footprint might be a little bit less than that we're not enough a carbon intensive industry. So I think, you know, didn't I love the point that Tasha made on transparency and really understanding what you're in? For me, I choose to go with I want to help the carbon intensive industries decarbonize. That should be that's a big, that's where I can make the most impact right versus and not to say, I'm not taking away from the others, like I do think it has to be balanced. But but ensuring you understand exactly what the investment manager is trying to achieve. That their you know, their objective is consistent with the sustainability reporting that they're providing to you. And that you understand where there's, you know, nuances and in some of the metrics and why those nuances exist, it's absolutely important. So it's a little bit more work and still more education, what we all have to do and obviously better data needs to needs to still happen, but, but those are just a couple things that I think might be helpful.
Rosie 56:30
That's great. Thank you so much. Thank you both Fate and Natasha, for your time and your insights. today. I think we've covered some really fascinating topics. And thanks also to you for tuning in to today's podcast. We have quite a back catalogue of interviews and panel discussions on the Guernsey green finance podcast channel, and you can check them out by searching for Guernsey green finance wherever you get your podcasts. And if you enjoyed today's episode, please leave us a review or a comment. It's always great to hear your feedback. You can also find us at Guernsey green finance.org And we are guarantee.com. You can interact with us on Twitter at @GSYgreenfinance and at @weareGuernsey we will also have links to Fate Natasha and Mackenzie's social media in our show notes, so check them out to hear more from them. And we'll be back soon with another edition of the Guernsey green finance podcast.
Transcribed by https://otter.ai