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Making responsible investing the norm

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Key messages

For our funds that indicate in their investment strategies that they consider ESG factors:

  • Investing responsibly is part of MD’s investment management process.
  • Environmental, social and governance factors are used in our evaluation of securities.
  • Responsible investing is about reflecting our clients’ values and prudent investment management.

Investing at MD Financial Management (MD) has always been about achieving the financial goals of physicians and their families. To do so, in our actively managed  funds that indicate in their investment strategies that they consider ESG factors, we aim to invest our clients’ capital into businesses with strong, long-term fundamentals with sustainable business models and management practices. These businesses have a greater chance of generating attractive risk-adjusted returns.

Perhaps what’s not so obvious, is that investing responsibly is part of that. It’s our belief, along with the majority of our sub-advisor partners, that considering environmental, social, and governance factors (ESG) will create long-term value for our physician clients. Not only does responsible investing align with our clients’ values – to make a positive difference in the world – it’s also about prudent investment management.

Here’s why responsible investing is so important to us.

Aligning with your values

We look to understand and incorporate our clients’ values. MD has long excluded ownership of tobacco companies across all of our portfolios and products (since 1969), adding an additional exclusionary screen for cannabis-related stocks. In 2016 we launched the MD Fossil Fuel Free Equity Fund™ and the MD Fossil Fuel Free Bond Fund™, which also exclude companies involved in extracting, transporting or processing fossil fuels from the investable universe.

Recognizing different individuals have different values, where possible, our intent is to provide access to range of products to fulfill the differences in client values. Our product suite, subject to platform availability, is a combination of MD products (where we can meet the unique values of our clients) and available 3rd party products to target other specific client values.

ESG is part of determining if a company’s stock is a good investment

What are ESG considerations? It covers a wide gamut of criteria, but it can be generalized into a company’s impact on the environment (think carbon footprint or waste production), its social impact (working conditions, employee relations) and its overall corporate governance (ethics, diversity, compensation structures).

In collaboration with our sub-advisor partners, our investment teams consider a broad range of ESG factors, for our funds that indicate in their investment strategies that they consider ESG factors.  We do this not because it’s trendy, but because it’s about prudent investment and risk management. We dig this deep when assessing a company because we want to know exactly what we own on behalf of our clients. It is part of our investment process, for our funds that indicate in their investment strategies that they consider ESG factors, to ensure we continue to deliver long-term client value.

For internally managed mandates that indicate in their investment strategies that they consider ESG factors, rather than taking a passive approach, we conduct our own in-depth ESG research using data from MSCI and other ratings agencies. We look to apply a similar ESG lens to assets managed by our sub-advisor partners, with the Multi-Asset Management Team meeting regularly to review holdings and identify any stocks that require action.

Keeping companies and issuers accountable

As long-term investors and stewards of our clients’ capital, we believe in constructively engaging with our sub-advisor partners and the companies we invest in on a regular basis. Generally, we prefer constructive engagement over straight divestment because this allows MD, on behalf of our clients, to advocate for positive change and improvement in corporate behavior. Furthermore, we provide our clients with a voice through proxy voting to influence and promote good governance and management practices regarding material ESG issues that require shareholder votes.

Advancing sustainable investment practices

As a demonstration of MD’s commitment to responsible investing, we are a signatory of the internationally recognized, United Nations Principles for Responsible Investment (UNPRI) and a member of the Responsible Investment Association (RIA). Within these organizations, we are able to collaborate with other investment management firms. Together, we hope to advance responsible investing practices, help shape investment policy to address a range of ESG challenges and create long-term value for society in general.

Our chief objective is and will always be to achieve the best risk-adjusted returns for our clients so that they can achieve their unique financial goals. We believe that making responsible investing the norm is required to fulfill this objective – that it must be part of the overall investment management process, for our funds that indicate in their investment strategies that they consider ESG factors.

For more information about our approach to responsible investing, MD Funds or your portfolio, please do not hesitate to contact your MD Advisor*.

* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.

1832 Asset Management LP provides financial products and services and is a wholly owned subsidiary of the Bank of Nova Scotia, and an affiliate of MD Financial Management Inc.

ESG considerations are part of our investment process for the majority of the MD Funds, however, there are a few funds where ESG considerations cannot be applied to allow the fund to follow the specific Investment objective.

About the Author

David Larocque, CFA, B. Comm., is a Portfolio Analyst with the Multi-Asset Management Team of 1832 Asset Management L.P. He works with portfolio managers across all asset classes, with a specific focus on ESG and multi-asset products.

Profile Photo of David Larocque