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Fighting climate change: Send a message with your investments

Outdoor view of a hand putting money in to a piggy bank in front of a building.

I recently had a call with a passionate client about socially responsible investing and his concerns about climate change. In particular, he was interested in MD Financial Management's role in pushing the initiative of socially responsible investing forward and what we were doing from a portfolio management standpoint.

This topic is top-of-mind for investment managers, advisors and investors alike. The burning of fossil fuels is a major contributor to climate change, so the obvious action is to divest from fossil fuel related companies. Unlike pension or foundation funds, MD cannot make the decision to go exclusively fossil fuel free on behalf of our clients. However, we can provide viable investment options to enable clients to build portfolios that not only help them achieve their financial goals, but also help towards reversing climate change.

And that's exactly what we did.

Climate change awareness is at an all time high

Millions of supporters around the world are urging their governments to take action before it's too late after Swedish activist Greta Thunberg famously addressed the United Nations at the 2019 Climate Action Summit.

Earlier this year, the United Nations also released a damning report opining that we only have 11 years left to prevent irreversible damage due to climate change.

While millennials and Generation Z are at the forefront, leading the movement for socially responsible investing, it's clear that investors of all generations want the opportunity to secure their financial futures and the planet for future generations.

Cutting out fossil fuels shouldn't mean sacrificing performance

Given society's reliance on fossil fuels at this time, there are many companies involved in the extraction, transport, processing and storage of fossil fuels. It's no surprise that most portfolios have a substantial chunk invested in the aforementioned companies.

There was a belief that sustainable or socially responsible investing took a back seat to profits, shareholder satisfaction and dividends. This is no longer the case.

MD is a leader in this space, launching the MD Fossil Fuel Free Fund suite in 2016. We provide solutions for clients eager to send a climate change related message through their portfolios.

What sets MD's fossil fuel free funds apart is that they go beyond screening out the Carbon Underground 200 list (200 companies with the largest fossil fuel reserves in the world). Our solutions eliminate all exposure to the extraction, processing and transportation of any fossil fuels across stocks and bonds.

Futhermore, the funds also look to invest in innovative businesses that provide solutions to climate change and help reduce energy use, leading to sustainable, long-term returns.

Building responsible portfolios

With the MD Fossil Fuel Free Bond Fund, investors have a fixed income solution designed to conserve capital, produce income and meaningfully consider climate change. The fund can be be conveniently substituted for other fixed income holdings in your portfolio. For those looking for more growth opportunity, the MD Fossil Fuel Free Equity Fund provides an equity portfolio alternative without sacrificing long-term returns.

Usage of the funds is highly flexible and both funds are completely integrated into our portfolio construction process. With the launch of the MD Precision Portfolio Strategy earlier in the year, we built a series of portfolios using the fossil fuel free funds to fulfill a wide range of client needs.

So while we can't make the decision to divest from fossil fuels for our clients, we have made available options to invest in an environmentally conscious way. Reflecting the beliefs of Canadian physicians is something we take very seriously at MD. We are here to help facilitate what is important to you and help you create a portfolio that suits your financial, personal and ethical needs.

We are constantly looking for ways to innovate and deliver value add strategies to our clients. MD fossil fuel free funds are just the tip of the iceberg as we are actively building out our strategy. So stay tuned for more in the near future.

For questions or more information about MD fossil fuel free funds, please reach out to your MD Advisor*. He or she will be happy to provide more information and discuss how these solutions can fit in your portfolio.

MD Fossil Fuel Free Funds™ is a trademark of The Bank of Nova Scotia, used under licence.

* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec).


About the Author

Craig Maddock, CFP, CFA, CIM, MBA, is Vice President, Senior Portfolio Manager and Head of the Multi-Asset Management Team of 1832 Asset Management L.P. He leads the team of portfolio managers and investment analysts responsible for managing the firm’s mutual funds and investment pools.

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