ESG Championship to Distribute $75 Million to 3 Best Responsible investments

A group of eight charitable foundations and private trusts is launching a $75-million Great Canadian ESG Championship modelled on the Dragon’s Den reality TV show, motivated by the growing push for reliable data and labelling for environmental, social, and governance investments.

More than 50 asset managers across the country are competing for their share of the prize, the championship said in a release this morning. Organizers plan to announce a short list of nine contestants May 11, then reveal the winners at a hybrid live-virtual event in Montreal June 2.

In addition to Dragon’s Den, the event drew inspiration from the £32-million ESG Investing Olympics launched in the UK two years ago, said Éric St-Pierre, executive director of the Trottier Family Foundation, and Milla Craig, founder and president of Montreal-based ESG advisory firm Millani.

Great artists learn from their peers,” St-Pierre said. So after seeing three institutional investors and three corporate foundations pool resources for the successful event in the UK, the Trottier Foundation saw the opportunity to move some if its own endowment in a new direction.

“We had about $15 million that we were looking to reinvest anyway,” he told The Energy Mix last week. So instead of the usual, private decision process that runs through a foundation’s investment committee and board, “we decided to do it publicly and work with other investors to send a message to the sector on the need for clarity” in responsible investing.

That clarity matters a great deal, since “for asset owners like us, navigating this booming responsible investment market is a venture into the wild west,” St-Pierre added in this morning’s announcement. “Scratching below the label is as critical as it is challenging, because the risk of greenwashing is real.”

The announcement came just days after CDP, the UK non-profit previously known as the Carbon Disclosure Project, reported that only one in three of the more than 13,000 companies that disclosed their greenhouse gas emissions last year were working on low-carbon transition plans. The finding means that the companies, representing 64% of global capital markets, are “undermining the deluge of net-zero pledges agreed around COP 26,” Climate Action reports.

Currently one-third of organizations disclosing through CDP reported developing a low-carbon transition plan,” said CDP Chief Impact Officer Nicolette Bartlett. “This does not match the appetite from investors, customers, employees, and governments who are pushing for more scrutiny” in the months since last year’s COP 26 climate summit in Glasgow.

St-Pierre said the championship aims to “demonstrate and reward the best ESG investment practices in the market,” while amplifying investment managers’ demand for robust ESG investment standards. “This is an opportunity to collectively pool our resources and send a stronger message” on the need for better ESG regulation and labelling.

“This is a great initiative because investment management firms like to compete with each other,” Craig said, “and there’s nothing like a great competition to be the one who comes out on top.” She added that investment managers know how to move quickly once the “light goes on” about a new opportunity or customer expectation, and the competitive tone of the championship “is what will flag others, this ability to say, ‘they’re out there, and I’m still here?’”

That “big switch” is already under way in the wake of the COVID-19 pandemic, Craig said. ESG funds have been performing well, and many asset owners “are recognizing that perhaps they actually have a fiduciary duty to move some of their funds” into investments labelled ESG, sustainable, or green.

“So the money is flowing,” she added, but “there’s this lack of definition,” leading to concerns about possible greenwashing. That concern “has also created scrutiny, which I think is very positive for the market. And we are now getting to a point where the regulators are starting to step up” with new guidelines and labelling requirements.

St-Pierre said that guidance can’t come soon enough.

With C$230 million under management, “we’re on the radar of a lot of investment managers,” he told The Mix. “We’re seeing a lot of talk about ESG, we’re seeing great marketing materials, we’re seeing a lot of SDGs [references to the UN Sustainable Development Goals] thrown around, but when you look under the hood, there’s not much substance. They’re very strong on marketing, but there’s no integration of ESG within the team. Sometimes there’s no expertise, no basic understanding out there.”

Managers “know that investors really care about ESG,” he added, “so they’re very quick to promote it. But from experience, not all of them are as good at actually integrating it into their operations and advancing it from a cultural perspective.”

Craig said those gaps are a sign of an industry in need of definitions. “I’m not sure it’s intentional greenwashing, but more that the boundaries have not been set.”

St-Pierre agreed the errors aren’t deliberate, “more just the state of play and how things have evolved. Ten years ago, people weren’t necessarily talking about this,” and it wasn’t being taught in business schools. “There’s a lot more pressure now,” with pension funds, institutional investors, and colleges and university in the spotlight.

Craig said her firm’s tracking has shown a rapid shift in investors’ concerns about where they place their money.

There is something structural that has shifted in the last two years, particularly among Canadian investors,” she said. “Their expectations are changing very quickly, maybe not fast enough yet, but I think the impact will be very fast,” with better disclosure giving investors the information they need to back companies that are serious about the transition to real climate solutions.