Understanding our Responsible Investing portfolios

What is Responsible Investing?

Responsible Investing (RI) is a strategy that incorporates an analysis of a company’s environmental, social and governance (ESG) impact into the investment decision-making process. Our RI portfolios are created in partnership with our sister company NEI Investments. NEI has been Canada’s leader in RI investing for over 30years has the largest team of ESG analysts in Canada.

Our portfolios contain a professionally designed mix of equity and fixed-income mutual funds, all of which meet our ESG standards.

What is ESG?

ESG risk refers to the environmental, social and governance factors that present a risk to the value of an investment. We’ve all heard about issues like factory collapses, oil spills and worker exploitation. These risks not only impact people, communities and the environment, but may also affect how well a company performs for its investors. 

Managing ESG risk is a key component of Responsible Investing. By analyzing what ESG risks a company faces, fund managers can use the information to either engage with companies to help them avoid costly mistakes, or avoid investing in them altogether.Either way, thinking about ESG factors in addition to traditional financial measures can help improve the long-term performance of your investment.

Building Responsible Investing portfolios

The way companies are selected for responsible Mutual Funds is a multi-stage process:

  1. Financial Analysis: Portfolio managers begin by assessing companies through traditional financial analysis to identify the best investment opportunities.
  2. ESG Analysis: Once a company has satisfied financial expectations, it is examined for its ESG performance. This additional layer of due diligence helps form investment decisions by identifying over looked and sector-specific ESG risks.
  3. Responsible Investing screening: In addition to ESG analysis, our comprehensive screening process filters companies based on specific criteria:
    • Positive screening: Is a proactive process designed to screen-in companies that demonstrate leadership in key ESG areas.
    • Negative screening: Automatically excludes companies that participate in, or have involvement with specific industries such as: tobacco, weapons, nuclear power, gambling, and pornography.
  4. Portfolio Construction: When a company satisfies both the financial and ESG requirements, we can include them when building or modifying portfolios.
  5. Monitoring and Investigation: We continually review performance, operations, and market conditions and maintain an understanding of the true underlying exposure of all NEI funds.
  6. Corporate engagement: We don't think it's enough just to screen and monitor portfolio companies, we want to help them get better. So we actively engage with them through dialogue, shareholder resolutions and proxy votes, improving their ESG practices.

Portfolio manager selection

As an independent manager, NEI is able to choose the very best global managers for each mandate, bringing their world-class expertise to VirtualWealth.

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