North American Equities Team – Canada focused: Our approach towards responsible investing


The North American Equities Team – responsible for the Canadian investments – is focused on investing in high-quality companies at prices below our assessment of intrinsic value. A key part of our investment process is to invest in companies with an attractive expected return relative to the risks.

We are primarily focused on the bottom-up analysis of individual companies. This includes many elements such as financial projections and the determination of the company’s intrinsic value. Another key aspect of our analysis is the consideration of environmental, social and governance (ESG) factors. The ESG landscape continues to evolve, as does our approach to integrating these factors. In 2014, when Mackenzie first became a signatory to the United Nations Principles of Responsible Investment (UNPRI), ESG integration was often focused on risk management. Over time our process has evolved to mitigate potential risks, as well as capture potential alpha opportunities.

We believe for a company to be a top performer it needs social license — the support of all stakeholders: employees, customers, community, government and investors. We have generally found that our most successful and resilient investments are in companies that successfully consider the needs of all stakeholders.

“We invest in companies that understand the fundamental importance of managing all stakeholders. Maintaining social license and continually strengthening stakeholder relations are key elements that can define a company’s success.”

William Aldridge
Senior Vice President, Co-lead of North American Equities team

ESG integration process

Identification of key ESG risks

We research financially material issues as highlighted by the Sustainability Accounting Standards Board Materiality Map and utilize company’s disclosures and reporting as well as third party data resources such as Sustainalytics. The team also monitors changing government policies, both in Canada and globally, in areas like climate to predict potential changes in company intrinsic values. We acknowledge that ESG risks will vary by industry and company and may change over time. 


A key element of our process is to engage with company management teams and, if possible, boards of directors, to understand key ESG risks, and what steps, if any, are being made to mitigate those risks.

In addition, these meetings provide an opportunity to advocate for actions that we believe will improve the performance of the company and/or reduce potential risks.

An important component of our engagement and advocacy with portfolio holdings is the analysis and voting of annual company proxies. 

Analysis and investment recommendation

Once we have identified and assessed the key ESG risks, our next step is to incorporate our conclusions into our recommendation and fair value for the company. In some cases, we can quantify the risks through a change in the cost of capital or inclusion of future costs in our financial model. In other cases, it is a qualitative risk factor to be considered and monitored that may affect our final investment conclusion or limit the portfolio position size.

ESG risks are one of many factors that we consider when assessing the attractiveness of a potential investment. We may invest in a company that has a poor ESG record if we believe there is a compelling margin of safety to our fair value and there is a path to resolve the key ESG risks. An improving ESG risk profile may lead investors to award a company a higher valuation.

Energy example

Identification of key ESG risks:

One of the key risks in the energy sector is the level of greenhouse gas (GHG) emissions and its related effects on climate change. This exposes the sector to several risks such as increasing government regulation, declining fossil fuel demand and assets stranding at extremely low value.

For example, legislative changes relating to higher carbon taxes or greater capital expenditures to mitigate emissions have the potential to materially impact the fair value of the energy companies within our portfolios.


We engaged with companies to understand how rising carbon taxes would impact their cashflows and what steps they could employ to mitigate the impact. Options for mitigation include carbon capture, cogeneration, and more efficient thermal production methods. Based on the federal government’s longer-term goals, we created a forward-looking policy framework to incorporate rising carbon taxes for the sector.

Analysis and investment recommendation:

Based on the current framework, we determined there was a reduction in fair market values for the energy companies within our portfolio. However, we believe they still offered an attractive reward versus risk profile based on our long-term view on commodity prices. In addition, we determined that the natural gas orientated companies were also attractive investments and had a less onerous GHG emission profile than coal or oil, while being an essential transition fuel.

We continually engage with the energy holdings in our portfolio to assess the risks and discuss potential steps to mitigate their GHG emissions.

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