Charting a Sustainable Advantage

Responsible investing has been in practice for more than 30 years and has evolved considerably in its sophistication and range of approaches. Responsible Investing: Charting a Sustainable Advantage explores the conclusions drawn from RBC GAM's 2018 survey of institutional asset owners and investment consultants from the U.S., Canada, Europe and Asia on their attitudes towards responsible investing and ESG integration.


Performance has become a key selling point

of 2018 survey respondents believe integrating ESG factors can help generate alpha.

This is a significant increase from 2017 results when 24% of respondents said that they consider ESG to be a source of alpha. Only 20% of respondents in 2018 do not believe ESG integration is an alpha source. On the other hand, the level of uncertainty about ESG’s merits as an alpha source remains strong: 42% of respondents continue to say they aren’t sure.

Responsible investing is increasingly considered to be a fiduciary responsibility

More than 50%

of all respondents who incorporate ESG factors into their investment approach say they consider this to be part of their fiduciary duty – double the percentage who said so last year.

Gender diversity on corporate boards continues to be important

42% of institutional investors support shareholder proposals as an effective means to achieve gender diversity on boards. This replaced “market forces” as the preferred approach identified in last year’s survey. In addition this year, we asked respondents about diversity targets and discovered that 63% favour non-binding diversity targets and, of those, 64% support a target greater than 30%.

ESG goes beyond equities

Equities have been the primary focus when considering ESG factors with the survey confirming that the majority (84%) of institutional investors incorporate ESG factors into their process. However, the survey also indicates that ESG analysis is moving beyond equities, as 60% of respondents incorporate it into their fixed-income portfolios, 43% in real estate, 36% in infrastructure and 34% in alternative assets.


ESG Integration

Inclusion of environmental, social and governance (ESG) factors as a component of fundamental analysis to identify potential sources of alpha or risk reduction.

Socially Responsible Investing

Impact Investing

Allocating funds to earn a financial return alongside measurable social and environmental impact

Positive Screening

Using ESG measurements to select specific companies or sectors

Negative Screening

Using ESG measurements to exclude specific companies or sectors

Sustainability Themed

Building portfolios that only include investments that meet specific ESG criteria


Seeking to influence corporate behavior through direct engagement, shareholder proposals, and proxy voting.

Exclusion screens vs. ESG integration and engagement
As responsible investing has developed, the discussion about how to apply the principles in a portfolio has evolved from negative screens (often excluding “sin” stocks such as alcohol, tobacco and firearms companies) to a range of approaches with an increased focus on engagement with companies as a way to influence corporate behaviour. When asked in the context of the Fossil Fuel Free movement whether it was more effective to divest or engage, for example, 45% of the 2018 survey respondents said engagement is more effective (compared to 8% of respondents who prefer divestment), demonstrating that investors continue to favour engaging in dialogue with companies instead of simply selling their shares.

Negative screening
Among institutional investors who apply negative screens to their portfolios, companies associated with cluster munitions and landmines were the most likely to be excluded (75% of respondents screen them out), followed by weapons generally (66%), tobacco (60%) and fossil fuels (42%). With respect to fossil fuel screens, the survey revealed pointed differences by region: fossil fuel screens are unpopular in Canada (23%) while in the U.S. they are among the most widely used screens (62%) – in line with weapons and tobacco, and even slightly ahead of cluster munitions. In the UK, screens are applied more evenly across the board.

In this document, references to RBC GAM include the following affiliates: RBC Global Asset Management Inc. (including Phillips, Hager & North Investment Management), RBC Global Asset Management (U.S.) Inc., RBC Alternative Asset Management Inc., RBC Global Asset Management (UK) Limited and RBC Investment Management (Asia) Limited.