Interview on the Desjardins SocieTerra portfolios
Desjardins Wealth Management offers a range of investment products that draw on a responsible investment (RI) approach. Last week we published an interview on the Desjardins SocieTerra Environment Fund. This week we’re getting a closer look at the Desjardins SocieTerra Portfolios. Rosalie Vendette, Senior SRI Advisor at Desjardins, answers our questions.
Can you tell us a little about the Desjardins’s SocieTerra portfolios?
There are four SocieTerra portfolios available for several types of investor profiles: the SocieTerra Conservative Portfolio, the SocieTerra Balanced Portfolio, the SocieTerra Growth Portfolio and the SocieTerra Maximum Growth Portfolio.
What are the SocieTerra portfolios made up of?
Each SocieTerra portfolio offers a turnkey investment and includes six types of mutual funds that are all responsible investment funds. Two of these funds are Desjardins funds and four are provided by our partner NEI Investments.
How are the environment, social issues and company governance taken into account?
Over the years, Desjardins Wealth Management has put in place a series of strategies to implement responsible investing. Before an investment is made, each fund goes through the following steps:
- First, we apply a filter which automatically excludes the arms, tobacco and nuclear sectors. Then the companies undergo a financial analysis and their extra-financial and ESG (environmental, social and governance) practices are reviewed. This allows us to better understand the ESG risks to which these companies are exposed and to eliminate the companies that are non-compliant in these areas.
- Once the companies are selected, we know some ESG issues still need to be addressed for these companies. Well, they’re not perfect! And that’s why we’ve begun a dialogue with some of these companies. Dialogue is one of the tools we used to exert some influence. Other tools include shareholder proposals, which are sometimes used when dialogue proves ineffective or if there are major changes in terms of ESG risks. Companies also have annual general meetings, during which ESG issues are reviewed and analyzed and voting takes place.
NEI Investments helps implement the strategies described above for their funds and we handle the Desjardins funds only. The process is slightly different for the Desjardins SocieTerra Environment Fund, which is held under the SocieTerra portfolios.
Can you give us some examples of dialogue?
Let’s look at the Canadian National Railway Company (CN) for example. We know that a series of accidents involving unit trains carrying oil intensified investor interest in the risks of transporting crude oil by rail. Given the complex nature of the issue, our partner NEI Investments coordinated and organized a meeting with investors on the issue of crude-by-rail through a group of Canadian and American investors and set up a meeting with CN. Crude oil shipments, primarily bitumen from Western Canada, represent a small but fast-growing part of CN’s business. NEI Investments was able to learn more about the company’s safety management system, such as corridor risk assessment, safety audits, emergency preparedness, tank car upgrading plans, employee training courses, community outreach programs, and mutual aid agreements with other railroads and with oil & gas companies. This discussion helped convey the investors’ concerns and got us more information on the concrete initiatives and programs being set up by CN.
For more information on the topic or on dialogue with other companies, go to www.desjardins.com/IR.
Are there any controversial securities in any of these portfolios? Please explain.
Given that the above mentioned filters are applied, a portion of the securities deemed controversial will be eliminated automatically. However, because these portfolios invest across all sectors, except for the filters, they include investments in sectors deemed to be contentious due to the nature of their activities. I’m thinking of the energy sector with its crude oil producers and carriers and the materials sector with its mining companies.
Certain sectors, namely the heavy and natural resources sectors, may pose an environmental risk to other sectors. So it’s important to encourage and promote environmental protection, especially when we know that companies with good business practices not only have a positive impact on the environment but also influence and help set best practices for their sector.
Why are polluting companies that have a negative impact on the environment sometimes included in a responsible investment portfolio?
At Desjardins, we believe that investment products using a responsible investment approach have the potential to influence the practice of polluting companies. Shareholder engagement enables direct interaction with companies under the investment portfolio and encourages them to improve their ESG practices.
How do the SocieTerra portfolios stand out?
Desjardins members appreciate the SocieTerra portfolios because, in addition to using an RI approach, they’re turnkey investment solutions that meet the needs of many investors looking for sector-based and geographical product diversification.
Where can our readers get more information on these products?
The Desjardins Fund website is full of useful information. Desjardins members can acquire the SocieTerra portfolios through any Desjardins caisse in Quebec and in Ontario. Non-members and potential investors across Canada can call us at 1-866-666-1280. And Ethiquette readers can also speak with a personal finance advisor affiliated with DSFI (across Canada, except in Quebec) or the State Farm network in Ontario.
*The Desjardins Funds are not guaranteed, their value fluctuates frequently and their past performance is not indicative of their future returns. The indicated rates of return are the historical annual compounded total returns as indicated the date of the present document including changes in securities value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The Desjardins Funds are offered by such registered dealers as the Desjardins Financial Services Firm, a mutual fund dealer belonging to the Desjardins Group that distributes the Funds in caisses throughout Québec and Ontario, as well as through the Centre financier Desjardins.