How to make money work in more ways than one & the climate concerned Canadian

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BY Kait Moreau

In April, the Intergovernmental Panel on Climate Change (IPCC) released its 6th assessment report, describing the terrifying impact climate change is having on regions across the world. From extreme weather and ecosystem changes to increased water scarcity and food production challenges, the changing climate poses immediate threats to human health and to the wider natural world. Around the same time the IPCC report was released, Environics asked Canadians about their perspectives on climate change. Half of Canadians tell us they’re seeing and feeling the impact of climate change on their neighborhoods right now.

Even as the situation becomes more alarming, many governments are struggling to take decisive climate action. Canada has set targets for reducing emissions, but experts suggest current measures are insufficient to meet those targets. In this context, most Canadians say they want to take personal action, reducing their individual and household carbon footprints. Although individual steps can feel inconsequential, many see these as a complement to – not a replacement for – demanding more action from government and business.

 

Canadians’ views on climate change: alarmed enough to act, unsure what to do

To develop solutions with potential for widespread adoption, it’s important to first understand Canadian attitudes toward climate change. This year, Environics surveyed over 2,000 Canadians from across the country to understand their perspectives.
A growing share of Canadians (32% in 2022 vs. 28% in 2021) say they have increased their efforts to reduce their own personal carbon footprint. But many feel pessimistic: more than 40% of Canadians agree they often feel depressed when thinking of their future and how climate change will affect it. People younger than 35 are most likely to agree that the future makes them feel depressed.

Half of Canadians (49%) are seeing the effects of climate change on their local neighbourhood right now, in particular those in B.C., who faced the devastating effects of the 2021 heat wave and floods. Finally, more than half of Canadians wish they could do more to fight climate change but aren’t sure what to do.

Canadians are taking a range of actions – from eating less meat and flying less to shifting to hybrid and electric vehicles – to reduce their carbon footprint. Many say they want to do more. Since three-quarters of Canadians have financial investments, taking a closer look at these investment portfolios may be a promising target for further action. Investments can deliver value in different ways – and express values, too – but are often overlooked as a point of leverage for social and environmental change.

Responsible investing (RI) can let Canadians incorporate their personal values and beliefs into their portfolios. RI is a wide-ranging category that offers a multitude of options, but our research finds only 8% of Canadian investors currently own an RI product.

Despite low levels of RI ownership, Canadians express interest in these investments because they see them as a way to achieve positive impact on the world. Environmental considerations rank as the most attractive aspect of RI. My previous article “Responsible Investing and Charitable Giving: Parallel approaches to social change” rebuts the idea that responsible investments are a form of charity and discusses the enormous carbon footprint of an individual investment portfolio. Available investment alternatives can reduce the carbon footprint of the average investment portfolio by anywhere from 50% to 70%. Investors can choose products that are certified to be fossil-fuel-free, or even products like Clean Energy Exchange Traded Funds (ETFs), which let investors back companies actively working to fight climate change. Impact bonds are another option; these fixed-income solutions let investors fund community projects that seek to deliver returns in multiple forms – including but not only financial ones.

One common misperception about responsible investments is that investors need to revise their entire portfolio; Canadians who own responsible investments, on average, dedicate one-third of their portfolio to RI. The proportion of the portfolio is customizable and investors can commit to a small proportion as they gain familiarity with these investments.

 

A different way to think about the future

Registered Retirement Savings Plans (RRSPs) – the focus of most Canadians’ saving and investing activity – are designed to help Canadians prepare for the future. But the threat of climate change means that financial security is not the only kind of security people – especially young people – contemplate when they think about the long term. What if climate effects means there is no bright retirement ahead? Solving for climate change requires a fundamental shift in how we view the world, including how we invest.

 

graffiti on wall encouraging people to act

 

There has been a lot of positive momentum in the industry as manufacturers have increasingly responded to investor demand with offerings that incorporate environmental, social and governance (ESG) factors. Nonetheless, some in the investment industry question how much difference these products can really make to the climate and to society. The question is valid, and it’s one that the industry itself has a critical role in answering. The industry should recognize that creating truly impactful products will resonate with Canadian investors who want to do more to fight climate change. Canadians who are under age 35 and/or those with an income of $100K or more are more likely to agree they wish they could do more to fight climate change but are not sure what to do. These two groups represent the future of investing and an important share of the market today – and they tend to be savvy investors who won’t be satisfied with “greenwashed” products.

Climate change can feel like an insurmountable problem. But Canadians are seeking opportunities for action across many areas of life – from the voting booth to the cash register. Many are willing to change their behaviour and their choices as consumers and investors in order to do their part. The investment community should understand that Canadians want their money to contribute to a brighter future in more ways than one: not only building personal financial security, but contributing to a more livable future for everyone.

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