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Originally posted on May 5, 2023
Advisors need to get on the learning curve to keep up with increasing client demand
Patti Dolan has seen such an acceleration in responsible investing since she began almost 30 years ago that she’s encouraging advisors to study it now as it’s soon going to be the wave of the future.
“I think it’s going to be how business is done. So my hope is that it’s not a niche anymore. It will just be how we generally invest,” Dolan, the senior wealth advisor and portfolio manager for the Calgary-based Wagner Investment Management Team with Wellington-Altus Private Wealth, told Wealth Professional.
“If we look at ESG side-by-side with the financial analysis, then we look at ESG as part of the package. I think that’s the way it’s going to be in the next five to ten years because I’m already seeing research reports that include ESG. That gets me very excited.”
Dolan began responsible investing in 1995, when she was setting up her practice and a client asked her to look into the new Dow Jones Sustainability Index. It had ten worldwide companies – three based in Calgary: Suncor, TransAlta, and TransCanada. That piqued her interest, but there were only two mutual funds in Canada screening for divestment and their performance was substandard. So, she started analysing companies differently and her interest grew as the field flowered.
In 2000, the United Nations issued its Global Compact with 10 principles for companies that wanted to incorporate good social practices. She volunteered to review international companies since no one had corporate responsibility reports then and just included data about their community or environmental engagement in presidents’ letters. But, the Canadian-based Jantzi Social Index, which looks at best practices in sectors such as oil and gas, also began then and has since outperformed.
“Companies or portfolios that are screened with ESG tend to be a bit more resilient. Why? Because these companies have looked at different scenarios and set a policy to do their business in a sustainable manner. Then, when things happen – like COVID, or a financial crisis, those types of black swan events – they go down with the rest of the market. But, they tend to react better than companies that are unprepared,” said Dolan.
In 2005, the UN also launched its Principles for Responsible Investment with six principles that asset owners could incorporate in their investments. That began to impact institutional investors and pension funds. Then, in 2015, it adopted 17 sustainable development goals that also moved the bar.
Meanwhile, in 2008, Dolan joined the Responsible Investment Association – and served on its board from 2011 to 2020. In 2016, she was asked to join the Conference Board of Canada’s Corporate Responsibility and Sustainability Council, representing asset owners. She also began to teach a course on sustainable finance at Ambrose University in Calgary.
Dolan also became a portfolio manager, but found there was a lack of responsible investment products for the retail investor, so started managing her own ESG portfolios. She’d do the financial analysis and ESG scrub to see how companies treated the environment, worked with community, and governed themselves. As a member of SHARE, Canada’s leading shareholder engagement program, she also starting working with other shareholders to monitor and engage with companies to enforce their best practices, focusing on things like human rights issues within an organization.
“During COVID, we wanted to ensure that frontline workers were being properly compensated and had proper safety equipment. So, we worked with a number of organizations to do that and set precedents and standards for how other organizations treated their employees,” she said. “My clients love to hear that their money is not only making money, but that their money is making a difference.”
Dolan traced her interest in making a difference for both her clients and the world back to her parents, who were community volunteers. But, she noted that she’s also attracted more like-minded people ever since that first request from the professor-client who has since become a friend.
“That’s how my business has been built. I’ve got a lot of good friends and like-minded individuals who have joined me in it,” she said. “And now there’s been an increase in responsible investing.”
Dolan noted that she’s working with two other portfolio managers who are all starting to incorporate ESG into all of their portfolios as an added way to screen investments. She expects that all of their portfolios will soon be screened that way.
They now have 200 clients and $300 million in assets under management.
Dolan’s passion for this has also seen her lecturing on responsible investing in the University of Calgary’s MBA program for a decade. She’s also always willing to talk about it with other advisors – especially if her workshop participants say their advisors insist they’ll lose money in it.
“I tell them to tell their advisor to call me and I’ll have a coffee with them,” she said. “But, if the advisor doesn’t take me up on the offer, that person may become my client because more people are wanting this.”
While it may still be considered a niche market and the sustainable finance regulations are still being developed, Dolan noted that the demand for responsible investing is growing, so more advisors need to learn about it. Training programs, such as for chartered financial analysts, are catching up, Even chartered professional accountants are seeing a demand for sustainable reporting audits.
Given how she’s watched the rise of responsible investing during her career, she’s encouraging other advisors to learn more about it to meet the quickening demand from clients.
“I often say I feel a bit like Forrest Gump: my career path is that I’ve been in the right place at the right time,” said Dolan. “But, it’s great to come to work each day because my clients are not just clients, they’re friends. It’s pretty exciting to be involved in this and see how it’s growing.”
