At Canopy, responsible investing is the systematic evaluation of environmental, social, and governance (ESG) factors throughout the investment decision-making process. We believe the integration of responsible investment principles into our decision-making process enhances investment outcomes for our investors, with the added benefit of contributing to better societal outcomes.
Our approach focuses on ESG factors that are financially material and relevant to long-term investment performance, consistent with our multi-year investment horizon. ESG risk assessment is an integral aspect of our quality assessment framework. Our detailed qualitative ESG review directly impacts our view of company quality and therefore influences portfolio inclusion and weighting decisions.
We believe ESG considerations are particularly important for companies within our small and mid-cap universe, where:
- management quality and governance practices can be more variable and often differentiate successful from unsuccessful businesses;
- environmental and social risks can disproportionately impact companies with limited resources to manage challenges;
- established ESG practices often signal long-term thinking and strong management capabilities; and
- ESG-related opportunities and risks are often less efficiently priced in smaller company shares.