Fossil Free and Impact Investing Seminar

Fossil Free and Impact Investing Seminar

A presentation by Mike Thiessen for clients of Genus Capital Management.

Transcription

Sue-May Talbot : [00:00:02] Morning, everybody.

Sue-May Talbot : [00:00:06] Welcome to our Fossil Free and Investing, Impact Investing Seminar. And I’d also like to welcome our webinar participants as well. For those who don’t know me, my name is Sue Talbert and I’m a partner and portfolio manager here at Genus. Now we have lots of Genus staff in attendance, in attendance as well. But I’d just like to introduce the other portfolio managers here. We have Leslie Cliff, who is one of the co-founders of Genus.

Sue-May Talbot : [00:00:33] We have Grant Conroy. We have Stephanie Tsui. And we have Thomas Irwin.

Sue-May Talbot : [00:00:44] So let’s get started. I’d like to introduce our presenter today, Mike Thiessen. Mike is a partner at Genus and he’s also the Director of Sustainable Investments.

Sue-May Talbot : [00:00:55] Mike.

Mike Thiessen: [00:01:00] Thank you all for coming out today. Mic just turn up. Thank you all for coming on today. This is quite an exciting topic, especially right now with everything that’s going on. So today we’re gonna talk about your investments as a tool against the climate crisis. We’re going to look at fossil free investing, an impact investing. And right now, it’s you know, it’s especially important given everything that’s going on. You know, you’ve had the climate rallies recently. Climate strike in the recent election. Climate action was, was a big deal and something that a lot of the candidates talked about, even in the States right now, a lot of the candidates are talking about climate action. And I think that using our investments, we really can have effect on on the climate crisis and we can significantly reduce our carbon footprint.

Mike Thiessen: [00:01:51] So we’re gonna go over a little bit about Genus and then we’re going to talk about fossil free investing and sustainable investing.

Mike Thiessen: [00:01:57] So Genus, at Genus we have clients that are really on the frontier when it comes to sustainability. And when it comes to fighting the climate crisis. And they’ve really encouraged us and pushed us to become better and better at that sustainable investing. And because of this, we’ve been able to be on the forefront of the Divest Invest movement. So divesting from things like fossil fuels, investing in securities and investments that are more impactful like renewable energy. We have been manage managing sustainable investments for 20 years now. So we really were early adopters when it comes to sustainable investing and fossil free investing. And this is largely because, at Genus, we’re a client centric firm, so we’re always listening to what our clients want. Plus, it’s something that we are quite passionate about ourselves. We offer a full suite of fossil free funds and impact solutions. We have candidates only six year fossil free track, balanced track record. And we’ve created Canada’s first public high impact equity fund. So this this has 5, a 5 year track record now. And so we are also early adopters. Where came impact as well. And Genus’s research shows that divesting from climate impacting fossil fuels has not sacrifice returns. And I think this is a very important point, especially when or why the scale up sustainable investing, scale up fossil free investing. We need to see the financial returns as well. So we’ll get into some of that research a bit later.

Mike Thiessen: [00:03:30] So, Genus, at Genus we just celebrated our 30th year anniversary. We offer sustainable solutions to changing client needs. As I said, we’re quite a client centric firm. In terms of assets under management, we have one point six billion in assets under management, about one point one coming from wealth management clients and then about five hundred million coming from, from foundations and other institutions.

Mike Thiessen: [00:03:59] And as I said before, we have clients that are really on the frontier when it comes to sustainability, when it comes to climate action. So here are a few of our public clients. So we’ve clients that are part of environmental foundations, like the David Suzuki Foundation, like Clayoquot Biosphere Trust. We have clients that are in education like BCIT, or the arts, like Vancouver Art Gallery or the Vancouver Symphony Orchestra. We have clients that are public foundations. We also have religious organizations as clients that are quite sustainable in fossil free. And at Genus, we are committed to sustainability and it’s really, you know, it’s part of our core, at Genus. We have a strong sustainability policy and we’re signatories to the UN. Principles for Responsible Investing, we’re members of the Responsible Investment Association. We, we’ve signed the Montreal Carbon Pledge, the Carbon Disclosure Project, but something that really sets us apart, as an asset manager, is that we’re a certified B Corp. It’s quite rare for asset managers to be B Corp’s and I believe we’re one of the first in Canada to become a B Corp. And what it means to be a certified B corp is that we’re a for profit entity, but we’re striving to be a force for good in society. And in order to become certified, you have to pass rigorous testings and you have to, you have to be accountable to certain sustainable and impact metrics. So in order to become a B Corp, we had to show that we had products that were sustainable and impactful. And so we had our fossil free funds are our impact fund. We had to show that we were the diverse, firm and, at Genus we have diversity, all the way from the leadership down to entry level positions, were an employee owned firm and we have quite a strong sustainability policy. So all of these factors really helped us in becoming certified B Corp as an asset manager.

Mike Thiessen: [00:06:02] So, now, this is sustainable investing. We’ll talk about how we can invest sustainably and what the overall effects are of sustainable investing. So first we’ll start with the why.

Mike Thiessen: [00:06:16] So why would we decide to invest in a fossil free manner? Why would you decide to invest sustainably? And here is a big reason for that: there is a relentless rise of carbon dioxide in the atmosphere. You can see that over hundreds of thousands of years, the carbon dioxide in the atmosphere hasn’t gone above 300 parts per million. But in 1950, it bypassed that that threshold. And ever since then, it’s been growing, it’s been increasing very quickly. And right now, we’re at about four hundred thirty four and thirty five parts per million in the atmosphere. So a lot of people see this and they see this connection to to climate change. And they also don’t want to be part of this climate change. They want to be mitigating climate change and reducing their carbon footprint. So that’s that’s a big reason why a lot of people decide to divest. And why people decide to invest sustainably. So this would be the values perspective of why to divest. So investors that are, that are investing in fossil fuel companies or other companies are essentially funding these companies. So as, as a stockholder in a fossil fuel company, you are really an owner of the company. So if you are, if you wanted to mitigate climate change, if you wanted to be a strong proponent in climate action, you shouldn’t be owning a fossil fuel company or you shouldn’t be owning other controversial industries that you don’t agree with.

Mike Thiessen: [00:07:52] And then other people decide to divest due to a financial perspective. So when you’re holding controversial products that tend to harm people or harm the environment, then you’re going to be open to more risks. You’re going to be open to risks such as litigation. And we’ve seen this in the tobacco industry and we’re seeing this a lot in the oil and gas in the fossil fuel industry right now. You’re going to be open to more risks with taxation (we’re seeing this with the carbon tax), also regulation. And then, and then there’s going to be more cultural, cultural backlash as well. And we’re certainly seeing this with, with fossil fuels right now and all the climate rallies.

Mike Thiessen: [00:08:32] So divestment is really a social phenomena. And we see this phenomena happening in three different ways and we’ve seen this with the tobacco divestment, we saw this with the weapons divestment around the apartheid in South Africa. So within these three waves, the first wave is typically religious groups and activists, organizations or foundations deciding to get out of a certain industry. So fossil fuels being the case now. And we’ve certainly seen this in Canada. We have a lot of activist type clients, we have a lot of religious organizations, churches that have decided to divest because it’s really against the core of, why they exist, of their mission. So they don’t want to be a part of fossil fuels because they want to be good stewards of the environment or they want to be strong proponents against climate change.

Mike Thiessen: [00:09:25] And then the second wave is typically universities, cities, public institutions; And globally, we’ve seen universities decide to divest, especially in Europe. A lot of universities are divesting. We’ve seen cities around the world decide to divest. New York City, San Francisco, Paris, London has decided to divest. Certain countries have divested. So Costa Rica has decided to divest. So globally, I would say that we’re probably in the second wave, but I think here in Canada, we’re just starting to enter the second wave. We have universities considering divestment. Often universities are decided to lower their overall carbon emissions in their portfolio, or maybe they’re taking a portion of their portfolio and they’re deciding to invest more sustainably with that portion of the portfolio. But it’s quite rare in Canada for a university to fully divest. So I think we’re just starting that second wave in Canada.

Mike Thiessen: [00:10:22] And then in terms of the third wave in, in, in Europe and in certain other areas of the world, they might be starting the third wave. There is some pension funds which would be included in the wider markets that are starting to divest or at least consider divesting. And a lot of retail clients are considering divestment, especially in certain areas of Europe. But in Canada, we’re definitely not at the third wave yet. But I think it’s going to come.

Mike Thiessen: [00:10:53] So when we talk about sustainable investing and fossil free investing, there are many different terms. And so I think that it’s good to look at a spectrum of different sustainable investment styles, so that we can all be on the same page when it comes to certain terms and know kind of the different options that we have when it comes to sustainable investing. So first of all, we have regular investing. So this is what everyone knows, you know, you’re trying to maximize your overall return, minimize your risk. Next, we have responsible investing. So with responsible investing, you’re starting to consider environmental factors, social factors, but you don’t necessarily have to take action on them. So maybe if you’re investing in an insurance company, you might want to look at different environmental factors. But you’re only looking at these factors really if it’s going to if it’s going to benefit you or if you think it’s going to benefit you. So that would be responsible investing. Next to be socially responsible investing in a socially responsible investing, you are starting to draw a line and saying, OK, I will invest in this, I won’t invest in this. So maybe it’s tobacco you don’t want invest in, you’re saying invest in everything else, just not tobacco or within our fossil free funds, we’re not investing in fossil fuels. So you are drawing a line, what you’re gonna invest in, what you’re not going to invest in, but you’re still able to have a public market return, public market risk.

Mike Thiessen: [00:12:16] And then the next category of sustainable styles is mission based investing or impact investing. So this is where you’re not just taking out the bad stuff from your portfolio, but you’re actually putting in the good stuff.

Mike Thiessen: [00:12:31] So instead of just taking out tobacco, maybe you are, are investing in things like innovative new health care company or instead of just taking out fossil fuels, maybe you’re investing in renewable energy. So you’re starting to look at positive screen, as they call it, so you’re you’re trying to make that that environmental or social impact.

Mike Thiessen: [00:12:52] So the first category here is liquid impact: so this is impact investing where you’re investing in stocks or liquid bonds or funds that are holding stocks or bonds, and you’re still getting public market return, public market risk, you’re considering ESG. And Genus has a fossil free high impact equity fund that would that would fit in this liquid IMPACT category. The next category is illiquid impact: so here you’re making impact, but your money is will be locked up for a few years, maybe two years, five years. It could be 10 years for some private equity funds. So within illiquid impact, you could be investing in things like private debt or private equity or real estate infrastructure. And then we have venture compact: so venture impact is venture capital, but with an impact focus. And then finally, we have philanthropic impact: so philanthropic impact is a, is a unique type of impact, investing where you are deciding to give up some return or take on additional risk to have that impact that you wanted to make. And it’s a common misconception that, that all impact investing is like philanthropic impact, where you’re having to give up something in order to get the impact. But a lot of studies show that you are able to have similar returns with impact investing as you are just with, with regular investing, responsible investing.

Mike Thiessen: [00:14:22] So Genus has has listened to clients and and and heard what they don’t want to be investing in. So these are kind of, our our negative screens, they call them, so this would be kind of within the social responsible category. And so these are some products that we don’t invest in within our fossil free funds. So here we have products like fossil fuels, weapons, gambling, junk food, nuclear, adult entertainment, alcohol and tobacco, GMO.

Mike Thiessen: [00:14:56] And then also within our fossil free funds are sustainable funds, we rank the stocks based on environmental, social and governance factors. And then we take out the bottom performers in those areas. We also look at the underlying pillars of environmental social governance, so things like climate change, biodiversity loss, we look at things like human rights or business ethics and we make sure that we we don’t have the worst of the worst of in those areas within the portfolios as well.

Mike Thiessen: [00:15:29] So to look a bit deeper into what we mean when we say fossil free, because there are some different definitions of what fossil free is, what fossil free investing is. So for us at Genus, we again have listened to what our clients want when it comes to fossil free investing in our clients who said that they don’t want to be investing in oil and gas, refining, storage marketing, they don’t want to invest in oil and gas producers and they don’t want to invest in energy equipment and energy services companies, companies that are transporting fossil fuels. So this would be things like pipelines.This would even include railways that make most of their revenue from oil and gas and also companies in the utility sector unless they’re purely renewable energy.

Mike Thiessen: [00:16:18] And when we build a portfolio, we need to continually monitor the portfolio and look at different controversies that come up. So here you can see the cartoon about the emission scandal around VW that happened around 2014, 2013 to 2014. So we we continually are looking into controversies like this and avoiding controversies that are either widespread or quite severe. So the VW scandal would be something that we would look at and and because of this, we’ve decided not to invest in VW. And there’s other other controversies, such as some recent ones, like like SNC Lavalinand that we we’ve used to you know, we’ve decided not to invest in that, other ones in the States like like Wells Fargo and their aggressive sales tactics. So it’s important to continually monitor the portfolio for these controversies. So there’s a lot of different colors here, but this is kind of, this is the results of of all of this sustainable investing, all of the fossil free investing. This is what our clients get in the end. And also financial returns as well, but we’ll get into that shortly. So first, on the on the left here, we have fossil fuel reserves. So you can see the first three funds have zero reserves. And these are fossil free funds. These are the Genus Fossil Free Funds. And then beside them in the red and the blue line are the benchmarks. So these are the indexes that we compare our funds to when it comes to financial returns and when it comes to, when it comes to these sustainable metrics. And so they have significantly, or they have significant, fossil fuel reserves. So So the one benchmark, which is 35 percent TSX, 65 percent MSCI World, it would have four hundred and ten million barrels of oil equivalent within the portfolio. Whereas, you know, if you compare it to our fossil free portfolios, they would have zero fossil fuel reserves. And so in order to have zero fossil fuel reserves, you can’t just cut out oil and gas, you also have to look at other companies that might hold fossil fuel reserves as well. A lot of mining companies will have fossil fuel reserves, even though we will invest in other mining companies, but not if they have if they have reserves. And then we also look at carbon intensity, and we can drastically lower our carbon intensity by investing fossil free. So carbon intensity is the tons of carbon emissions that a company is emitting per million in sales. So a company like a coal utility is going to have massive carbon intensity. So they’re going to be having, they’re going to be emitting many tons of CO2 for every million in sales, usually for for a coal utility, it might be about ten thousand tons per every million in sales. But then other companies, like tech companies or financial companies, they’re going to have much lower carbon intensity, because they don’t emit very much carbon per every million in sales, so their carbon intensity might be something like 10 or 15, so it really varies. So you have coal utilities, about ten thousand fifteen thousand; You have tech companies at about 10 or 15. So depending on which industry you’re investing in, depending on which companies you’re investing in, you can drastically decrease the carbon intensity in your portfolio, and that’s decreasing the carbon intensity of your overall investments and lowering your overall footprint. And then we also have ESG ratings. So ESG standing for environmental, social and governance. And through sustainable investing, we can have higher ESG ratings on average within within funds than our benchmarks as well.

Mike Thiessen: [00:20:15] Another critical element of sustainable investment is engagement. So if there’s an industry that doesn’t align with our values, then we decide to divest from that industry. But still and we’re investing in other other companies within the portfolio. There’s going to be some areas that we want to encourage them to improve on. So these are the engagement themes that we that we work with companies on. So first we have climate transition, we have decent work, human rights, reconciliation, water and plastics, which is new for 2019, and then corporate governance. So we work with a great organization called Share and they help us work with a lot of these companies and try and make them better, better, which makes our portfolio better.

Mike Thiessen: [00:21:06] So one question that we often get from from clients and from potential clients is, you know, “I want to invest sustainably, I want invest in a fossil free manner, but what does this mean for performance?” “I still need to make money for retirement.” “I still need to make money for kids, tuition”, whatever it might be. “So can I still perform and be fossil free and lower my carbon footprint?” And so we’ve done a lot of studies, a lot of scenario analysis, back tests for clients looking at this issue. And our conclusion is that you don’t need to be investing in fossil fuels or to get good performance. You can have a fossil free portfolio and still have great performance. So here is back tests, that goes back about 21 years. So we looked at the market in Canada, the US, internationally, globally. And then we were then we looked at those same markets and looked at the performance if you were to take out fossil fuels, and if you were to go fossil free and do it in an optimized way (we’ll get more into it, what optimized means in a later slide), if you were to be fossil free optimized, you were you would be able to significantly beat the market on an annualized basis in Canada, in the US, internationally and globally. And that’s over the past 21 years or so. So with this, we can we can certainly tell clients that you don’t need fossil fuels for performance. And just to drive home the point even more so, this is our live performance of our fossil free flagship fund.

Mike Thiessen:[00:22:41] So this flagship fund is called Genus Fossil Free CanGLobe Fund, and it’s been operating for six years. So has a six year track record. And over this six year time period, the annualized return has been twelve point seven percent versus the benchmark that has a return of eleven point five percent. And the benchmark does include fossil fuels in it, whereas our fossil free fund, of course, doesn’t have fossil fuels. So with our back test and with live performances, we may able to show that you don’t need fossil fuels for performance. And again, just more performance, fossil free investing.

Mike Thiessen: [00:23:16] So this is our fossil free institutional balance composite, which means it’s a combination of all of our balanced mandates for institutions. And overall the performance for these balance mandates have been seven point eighty eight percent versus the benchmark, which is seven point four five percent. And again, that benchmark has fossil fuels in it, whereas our fossil free institutional balance cops, it doesn’t have fossil fuels.

Mike Thiessen: [00:23:45] So, no, we’ll get into a little bit of how we make fossil free work. And one way that we do that is we think globally. So if you look at Canada, if you look at the TSX, about 30 percent of the value of the TSX comes from oil and gas refineries, utilities, transporters of fossil fuels. So that’s that’s a massive portion of the overall index. And it makes it quite difficult to fill that gap, because you have to fill that 30 percent with the rest of the 70 percent, and it can can skew the portfolio quite a bit. So we think globally, because if you if you look at a global index, fossil fuels make up only about 10 percent of the overall index. So it’s much easier to fill that 10 percent gap rather than the 30 percent gap. And then when you think globally, you can choose the best of the best stocks from around the globe and you’re able to optimize your portfolio better for for risk management.

Mike Thiessen: [00:24:43] So another way that we do it is we energize portfolios without energy. So this is the optimization that we had talked about before with with that back test. So when we take out energy out of the portfolio, we don’t just increase all the other weights of every other company in the portfolio. We actually look at what sectors, what industries, what companies are highly correlated with oil and gas in the short run. And we fill that gap with those companies. And in that way, we’re able to have similar performance to the market in the short run, but we believe we’ll have better performance in the long run. So this is what we call optimization. And we have software that’s able to do this for us, that is able to find these highly correlated industries or companies to fill that gap.

Mike Thiessen: [00:25:34] So now we’ll move on to impact investing. So impact investing is is an area of sustainable investing that has been fast growing. It’s been highly talked about topic with with a lot of foundations that are really wanting to maximize their impact as an organization. A lot of individuals and families have been started to get into impact investing. And it’s something that Genus has been doing for the past five years.

Mike Thiessen: [00:26:02] So it, with impact investing, you’re trying to achieve both your financial goals and and make social impact or an environmental impact. This enables you to activate more of your financial resources to do good. So you you’re not just doing good with the amount of capital that you’re using to, you know, possibly donate to charity, or if you’re if you’re a foundation, then it might be,you know, you have 3.5 percent that you need to, but you need to contribute towards certain programs. But with impact investing, you can activate your entire portfolio or whatever portion of your portfolio you devote towards impact. And you’re able to have bigger total returns when you account for social and environmental benefits that you’re making on top of the financial benefits. So sometimes we like to use this iceberg analogy when looking at a portfolio and looking at the impact above the water, you have kind of all your traditional portfolio returns, you have you have growth, you have income, you have your financial returns. But then below the surface, you also can can have a large benefit, and you have the potential to do a lot of good through impact investing. So you have a different type of return that’s below the surface that you’re able to activate.

Mike Thiessen: [00:27:26] So just some impact investing examples. So within our Genus Fossil Free High Impact Fund, we have we have these companies that are that are within the fund.So we invest in things like renewable energy, so we have a company in there called First Solar. So they’re based in the US. They design, engineer, manufacture, construct large scale solar power plants for global companies. And we also invest in energy efficiency companies like Citrix. So Citrix is a cloud computing company and cloud computing is much more energy efficient than local computing. So as a result, they’re able to lower the carbon footprint of their clients. We also invest in companies that that operate green buildings. So like Capitaland out of Singapore. So Capitaland makes about 83 percent of its revenue through operating, leasing and constructing green buildings around the world. We also invest in companies that have socially impact. So social impact in health care. So we invest in companies like Jazz Pharmaceuticals that have made large advancements with with cancer treatments. We invest in educational companies like Benesse Holdings out of Japan. So they have products, educational products and apps and educational services for students. We also invest now in in private impact investments as well. So here’s an example of a private debt instrument that we have invested for a certain class. So this is CoPower. So CoPower is a private debt product and the proceeds go towards clean energy infrastructure. And they also devote some of the the proceeds towards energy efficiency projects. And through a private debt instrument like this, investors are able to get a 5 percent return over a six year time period and they’re able to make impact when it comes to sustainable cities, climate action, responsible consumption, and they measure the impact that they’re making by measuring CO2 emission reductions.

Mike Thiessen: [00:29:35] Another example of a private impact investment is a venture capital firm, like like Rhiza CVR3. So this is this is an organization that invests in in businesses in B.C. that are either making a social or an environmental impact. So they have a higher projected return because are a venture capital. But of course, there is a distinct in venture capital, and they have an eight year term, and since they’re investing in companies in B.C. and companies that have high, high percentage of the revenue going towards research and development, the investors in this fund, they’re actually able to get a tax credit as well. And in terms of impact, they want to make impact when it comes to good health and well-being, climate action, decent work and economic growth.

Mike Thiessen: [00:30:28] So a lot of our foundations that we have as clients, they measure their impact. They measure their programs by how they’re contributing towards sustainable development goals. So these are the UN Sustainable Development Goals or SDGs that were adopted in in 2015. So it’s 17 different goals that cover different areas of impact around the world. So everything from lowering poverty, health care, education, you have clean, affordable energy, climate action. And underlying each of these 17 goals are our kind of subgoals underneath these as well. So a lot of our foundation clients are focusing on these. So we decided that for our impact fund, we are going to focus on these as well. So when we’re when we’re measuring how much impact are are high impact fund is making, we look at the percentage of revenue that the companies are generating from impactful products or services. So a company in our portfolio like Vestas Wind Systems, that’s out of Denmark, they manufacture about 17 percent of the wind turbines around the world. They’re 100 percent of their revenue comes from from impactful products. So they would have 100 percent impact. And then we might invest in other companies that have energy efficiency projects, but maybe that’s about 40 percent of their overall revenue. So then that would be 40 percent impact. And within our impact fund, we want to have an average impact within the companies we’re investing in. Of about 50 percent. And right now, within that fund, I think, right, about 57 percent of revenues are generated through impactful activities.

Mike Thiessen: [00:32:13] Also in our impact fund, we focus on nine different themes. So we have four themes within. Environment. So very similar to the Sustainable Development Goals, three in social, and then two that are both environmental and social.

Mike Thiessen: [00:32:31] And then when we’re when we’re measuring our overall impact of the Genus Fossil Free high impact fund, we compare it to our benchmark. So it’s the benchmark that we also compare our financial returns to. We compare our impact to. And as you can see, it’s it’s the middle paragraph there, it’s MSCI World. About 6 percent of the revenues generated by companies in that index comes from impactful services or products vs. over 50 percent for our impact fund. Now, again, a big question that comes up not just with fossil free investing, but also with impact investing is this sounds great, but they also need to make performance. I need to save for X, in the future. So there have been multiple, multiple studies on impact investing and the performance. There isn’t as much data around impact investing just because it is a more emerging area of of investing, but if we look at the Wharton study in the middle there, they looked at 53 different impact funds over a 14 year time period. Within those funds, there were 170 different impact investments and there their average annual return was about 13 percent. And this was right on their benchmark, which was the Russell 2000, so they were quite happy with these results. Also the IFC, so the International Finance Corporation, they did a study over a 10 year period where they invested 2 billion of their of their of their dollars in a bunch of private equity funds, mainly in emerging markets. And they found that their annual return was about 20 percent over that time period, which greatly surpassed their the benchmark that they had set out to have. And then GIIN on the left did a study based on expectations. So they talked to a bunch of impact investors, impact owners, asked them what they what they expect their return will be. And the average investor said that they expected their annual return to be about 9.5 percent if they were to invest in developing markets and about 15 percent if they were to invest in emerging markets. And then they also asked them later, how many of you met your financial expectations? And about ninety one percent said that they met their met their financial expectations.

Mike Thiessen: [00:34:57] So at Genus, we’ve done sustainable investing, and social responsible investing for about 20 years now, we’ve had six years of fossil free funds. We’ve had five years of impact investing within public markets. And then now for the past year, we’ve started to invest in private markets for impact. So we have teamed up with an organization called SVX out of Toronto. So SVX is a platform where where people can go and they can buy private impact investments. And SVX is really at the cutting edge when it comes to private impact investing in Canada. So we’re working with them to create customized impact portfolios for clients that are across all asset classes. So clients can be invested in public equity, they could be invested in private equity, private debt, infrastructure, real estate, a whole variety. And we’re focusing on making the impact that our clients really want to make. And at the same time, meeting their financial goals and other requirements that they have. So, listen, this is an exciting new area for Genus.

Mike Thiessen: [00:36:06] So finally, just to summarize, we threw through our investments, we can really make a difference when it comes to climate action. We can lower overall our carbon footprint. We can lower the carbon intensity of our portfolio, which makes which makes a massive difference. And we don’t need harmful investments. We don’t need fossil fuels in order to make a good return. We have seen the back tests. We’ve seen studies showing this that you don’t need to have fossil fuels to make good performance. And Genus is a leading provider when it comes to fossil free investing and any impact strategies and we’re happy, happy to help anybody along their fossil free journey or impact journey as we move forward.

Mike Thiessen: [00:36:53] So thank you for listening to the presentation. And if you have any questions, I’d be great.

Sue-May Talbot : [00:37:02] Thanks, Mike. Now it’s great. It’s very comprehensive. Grant.

Mike Thiessen: [00:37:11] Yeah. So it’s become quite common among a lot of people. Oh repeat the question. So explain why greenwashing is. So it’s it’s something that’s become quite common across a lot of asset managers, even here in Canada, where asset managers are trying to jump on the bandwagon of the whole green movement and make their products look like their green products. So they might have just a simple screen or they might make a simple tweak to their portfolio in order to make it look like it’s a sustainable investment strategy just for basic marketing purposes. And that’s something that we’ve been fighting against for a while at Genus, because sustainability is really at the core of Genus and something that we care a lot about that our clients care a lot about. So it’s a it’s a battle for us, you know, trying to educate about greenwashing.

Mike Thiessen: [00:38:09] Yep.

Audience: [00:38:09] About it seems to me that you’re really trying to do something which is very tangible. But things like railways. Now, [inaudible]. You’ve got things like banks. They [inaudible] how do you square this?

Mike Thiessen: [00:38:35] Yeah, it’s quite difficult. You’re right. It is tangled. It is it is messy. There’s no clearly defined way to do it. So we’re really just trying to do our best and listening to our clients and trying to figure out what they want. So when it comes to railways, we don’t exclude all railways. So we exclude railway’s if a majority of their revenues are coming from shipping oil and gas. So that would be the case for a Canadian railways [inaudible]

Mike Thiessen: [00:39:04] If they’re using it, if they’re using diesel to operate?

Audience: [00:39:09] Yeah.

Mike Thiessen: [00:39:10] Then we won’t exclude them. But if if their primary business is shipping oil and gas, then we will exclude them. So if is an electric railway in Switzerland, then no, we are happy to invest in that.Yeah.

Audience: [00:39:23] [inaudible] little little things like things. Do you [inaudible].Yes. Financial loans.

Mike Thiessen: [00:39:38] Yeah, that’s that’s that’s a good question. And that’s kind of the second level when it comes to sustainable investing, you’re not just excluding the oil or gas, but you’re excluding services to oil and gas, including financing. And that’s something that we’ve looked into a lot, and we actually have additional, more strict requirements for financial companies than we do for other companies because of that. So we have, so if a company is [inaudible] Financial is involved in financing highly carbon intensive industries or projects like a new coal power plant or something like that, then yeah. And it will be downgraded that it will be seen as a more controversial company.[inaudible]

Mike Thiessen: [00:40:26] It depends on the fraction. Plus just the severity. So even if they have one very severe case, then, then they could be booted out because of that.Yeah.

Sue-May Talbot : [00:40:43] I’m sorry, Mike. Mike, could you repeat the question, please, for our webinar? Sure. Sure.

Mike Thiessen: [00:40:51] Is there an example of a Canadian financial company that we’ve booted out based on severe carbon controversies? Within Canada, there is nothing I can think of, but there has been companies like Barclays Bank, that have been funding Arctic drilling and have been finding sourcing of palm oil that is done in an unsustainable way. And because of that, we’ve we’ve took them out of the portfolio. Also HSBC, because of some controversial funding as well.

Audience: [00:41:35] I think it’s been really great presentation. My question to you here at Genus, you’ve been at this business for 25, 30 years, in the, I imagine when you started out that the number of stocks in the companies you could actually select from was fewer than than there are today. So I’m just wondering what you’ve seen in terms of kind of the overall change and the economic mix out there in Canada? Or from what you can select from.

Mike Thiessen: [00:42:13] Yeah, I think there has been a large change. So if you look like six or seven years ago, if you were a little look at the most valuable companies in the world, it would have been Exxon, Shell, Chevron. It would have been all of these oil gas companies. And now if you look at the most valuable companies, it’s financials, it’s tech companies. So there really has been a big change in terms of overall value of these companies and their proportion of the of the overall index. And companies are making strides in the right direction when it comes to sustainability.

Mike Thiessen: [00:42:45] So so we have seen that there has been more companies available for investments, especially with impact investing. I think probably when that impact fund started, there is very few companies to really choose from and they probably weren’t as impactful as the companies are right now that we have to choose from.

Sue-May Talbot : [00:43:04] So, Mike, can we take a question from one of the webinar participants?

Mike Thiessen: [00:43:08] Yes.

Sue-May Talbot : [00:43:09] OK. So is cannabis excluded by Genus ESG screening along with alcohol and tobacco?

Mike Thiessen: [00:43:17] Good question. So this is something that we have been asked many times before. And it’s probably as popular question is, can I get good returns with fossil fuels? So we don’t have any cannabis in our fossil free funds. And we haven’t we haven’t written in stone that we’re not we’re not doing that. But we for now, we’ve decided not to do that, because we see we see cannabis kind of as a mixture of tobacco, of alcohol and pharmaceuticals. So if there was a pure cannabis pharmaceutical play, then then we would be open to that. If it’s purely just being used to help people. But in the recreational sense, if we are excluding tobacco, or excluding alcohol, then it doesn’t make sense to have cannabis in there as well. And in terms of finances, their ratings haven’t been great as well. So so that’s help the case.

Sue-May Talbot : [00:44:14] Ok, so here’s one more: would Genus invest in CP or CN?

Mike Thiessen: [00:44:21] No. Well, not an offer of fossil free funds. So just because a large percentage of their revenue comes from shipping oil and gas, we cost them as a energy transporter just like a pipeline. So so we don’t invest in them within our fossil free funds.

Sue-May Talbot : [00:44:38] Any other questions?

Audience[00:44:41] Yes.

Sue-May Talbot : [00:44:42] Just a sec, Peter.

Audience: [00:44:46] So I’m curious about the Sustainable Development Goals and how you report out to clients such as are such as us about the performance of your fossil fuel free or your impact funds on against those metrics?

Mike Thiessen: [00:45:02] Yeah. You can go back to. So we can report on them with something like this. So we look at the overall percentage of revenue generated by these companies that is coming from impactful products or services that are linked to a sustainable development goal. So we can report on this with with data, with graphs like this, showing what percentage of the overall revenue is coming from impactful services or products and then comparing that to its benchmark, like MSCI World, that is significantly lower when it comes to overall impact revenue.

Sue-May Talbot : [00:45:48] Anybody else?

Audience: [00:45:49] We could do that, but should we do that? Like, should we start reporting [inaudible]

Audience: [00:46:00] So that’s why I would also be curious. Fossil fuel free [inaudible]

Mike Thiessen: [00:46:12] Yeah, that would be interesting as well. We right now we focus mainly on carbon intensity. Oh, I keep forgetting to repeat the question. So. So there’s interest in reporting on GHG emissions for the fossil free funds. So I think that is something that is interesting that we definitely could and probably should look into. Right now we we look at carbon intensity, we look at fossil fuel reserves. But it’d be interesting to look at GHG emissions and then and then you can even link that to your own personal footprint as well. That’ll be easier for you to to use.

Sue-May Talbot : [00:46:49] Any other questions?

Audience: [00:46:51] What’s your position on nuclear power?

Mike Thiessen: [00:46:54] Ok. But position our position on nuclear power is a question. So for nuclear power, we have decided to omit that from our fossil free funds. But nuclear power is quite a controversial area. So there’s some people that are that are wanting to fight climate change that think that nuclear is a big part of the answer, such as Bill Gates. I don’t know if you’ve seen that recent documentary on Netflix. Yeah. Yeah. And then but then there’s others that don’t want to be investing in nuclear power. So what we’ve decided is to omit it from our funds. And then if people want to hold nuclear power outside of our funds, then then great. But in order to satisfy most of our clients that are in our fossil free funds, we decided to omit it.

Audience: [00:47:42] [inaudible].The trouble is, [inaudible].

Mike Thiessen: [00:48:12] OK.Thanks. We’ll look into that.

Audience: [00:48:14] Well, it’s early days that you just started.

Mike Thiessen: [00:48:17] So right now, most nuclear power plants were built in the 60s or 70s or earlier than that.

Audience: [00:48:24] So it’s serious business. So my [inaudible]

Sue-May Talbot : [00:48:36] Got another question here for you Mike.

Mike Thiessen: [00:48:37] OK.

Audience: [00:48:39] Do you consider factory farming in any of your investment portfolios?

Mike Thiessen: [00:48:45] Good question. So we actually haven’t. Oh, sorry. So for factory farming, this is something that we haven’t released yet, but we’ve done the work into it, studied it, and we’re actually going to be releasing it soon. But we’re going to make all of our fossil free funds factory farming free, as well. Triple F. Yeah, we. So right now we we exclude companies that are involved in junk food. So that already cuts a lot of factory farming out. But we’re going to do that in addition to the junk food screen. And that probably will be in place probably, mid-November and we’ll have a press release soon. So we’re excited about that.

Sue-May Talbot : [00:49:34] Sorry. We have one more here, Mike, from the webinar. How do you rate the impact of a company that produces solar panel? But in order to do that, has to do mining, which is considered very impactful on the environment.

Mike Thiessen: [00:49:50] Yeah. So there there are tradeoffs with a lot of these companies. Certainly with electric cars, there’s you know, there’s mining that’s needed to especially for batteries. And there’s been controversies around that. Certainly a lot of mining industries are more carbon intensive. But but mining isn’t even close to the carbon intensity as something like what the Tar Sands or like coal, especially coal utilities, doesn’t even come close. So we do we do look at that aspect when it comes to renewable energy. But what we’re still looking at, the overall impact that they’re making, especially in the long run, if these if these solar power plants are are going to be operational for decades, then then the positives definitely outweigh the negatives. And there’s been numerous studies on that. And if anyone’s interested, I can share some studies.

Sue-May Talbot : [00:50:50] Any other questions? Well, thank you, everybody. Mike, we’ll be hanging around for a little bit hopefully, and we even have Wayne here, Wayne Wachell the other co-founder and chief investment officer. So we’re we’ll be around if anybody has any additional questions for us. And thank you very much for attending.