ESG and responsible investment

More and more people are turning to responsible investment – an umbrella term encompassing the approaches used to deliberately incorporate environmental, social and governance (ESG) considerations into your investment portfolio.

As companies continue to innovate and strive for positive impacts, responsible investing opportunities continue to increase.

Like many of our clients, RBC Wealth Management focuses on community involvement, diversity and inclusion and environmental responsibility to support both current and future generations. To help you create a positive social and environmental impact, we offer a broad range of solutions designed to align with your values and financial goals.

Responsible investment

We can help you invest with purpose and apply responsible investment approaches to your wealth plan, including ESG integration, ESG screening and exclusion, thematic ESG investing and impact investing.

These approaches are not mutually exclusive; multiple approaches can be applied simultaneously within the investment process. We believe there are four main applications of this data:

ESG integration

ESG integration happens at the same time as traditional financial analysis. ESG integration is about understanding the material factors that are important to a company, as it helps create a clearer picture to better understand the potential impacts to long term value. A few examples of ESG factors include:

Environmental concerns: Climate change, natural resources conservation, pollution and waste management, and water scarcity

Social issues: Data privacy and security, community and government relations, workplace health and safety, human rights and diversity

Governance topics: Accounting practices, board accountability and structure, disclosure practices, executive compensation, corporate ethics, regulatory compliance and transparency

ESG screening and exclusion

Also known as investing in line with values or values alignment, this approach applies positive or negative screens to include or exclude assets from the investment universe. ESG exclusions and screening can also include socially responsible investing (SRI) inclusions and exclusions, norms-based investing (based on compliance with international norms), best-in-class (based on positive performance) and seeking leaders’ (poised for long-term growth) strategies.

Negative screening

Positive screening

Thematic ESG investing

This approach identifies a social or environmental impact or theme that the portfolio wants to measure and report progress in alongside risk and return. With thematic investing, there is an intentional allocation of capital to a specific investment theme (e.g. climate change, gender equity, sustainability-related categories).

There is significant investment into technologies that help alleviate threats to sustainability. At RBC Wealth Management, we use the term SusTech when discussing opportunities for sustainability through technology. We group these opportunities into five themes that provide a foundation for a long-term philosophy centered on SusTech – where technology solutions aim to support sustainability issues.

Impact investing

Support social or environmental issues with the expectation of achieving measurable results alongside traditional financial risk and return. Impact investors want a return on their investment but may also be willing to take a capital loss as long as there are tangible results for the investment. In that way, it’s essential to measure the impact of this investment.

A third dimension of performance

Royal Bank of Canada’s commitment

RBC is committed to sustainability, another key area of focus for responsible investors. RBC’s approach to sustainability is central to its business and stated purpose: to help clients thrive and communities prosper. RBC is listed as a holding in several responsible investing indexes, including Pax Ellevate Management’s Impax Global Women’s Leadership Index and the FTSE4Good Index. Additionally, RBC received the 2021 Catalyst Award for initiatives that have accelerated progress for women and elevated inclusion within its organization.

We also believe capital can be a force for positive change, as clearly demonstrated by RBC’s new business target: $500 billion in sustainable finance by 2025 and net-zero emissions in lending by 2050, which is aligned with the global goals of the Paris Agreement.