It’s what investors, Clients and employees are seeking. This playbook offers insights and actions you can take, no matter where your organization is on the sustainability journey. We’ll explore how having a sustainability strategy can improve outcomes relating to your plan, people, profits and the planet – and how Sun Life can help.

Why now?

The COVID-19 pandemic has underscored that the pursuit of profit cannot be the only driver of the economy. We can only speculate on the specific political, economic, and social consequences. What is clear is that today’s challenges will result in a shift in foundational principles for years to come.

The pandemic and many factors triggered by it have brought sustainability to the fore. These include volatile markets, social justice movements, accelerated digital transformation and growing urgency around the climate crisis. All these factors have caused a pause and rethinking of the status quo.

The pandemic has proven the viability of Environmental, Social and Governance (ESG) priorities. It has elevated the significance of social factors over the shorter-term, and environmental factors in the long-term.1 A recent study showed that ESG has become an even greater focus for 23% of respondents. The perceived importance of social considerations has risen by 20% since the onset of the pandemic.2

The post-COVID recovery presents an opportunity to rebuild in a better way. Canada’s resource-rich economy is poised for transformation. With the right level of investment and commitment by governments and corporate leaders, it can meaningfully contribute to a more sustainable global future. This is relevant to how governments and businesses run their countries and companies. It’s also relevant to how we structure and administer group retirement plans. This includes the investments offered to plan members, as they seek to build a sustainable retirement income.

  • Responsible Investments represent 62% of Canada’s investment industry, up from 51% two years ago.7

The sustainability advantage

Over time, a sustainable business model creates value for stakeholders without depleting the natural, economic, and social capital it relies on. Especially in volatile times, sustainability offers a future-proof strategy that’s good for business: 

  • Improved financial performance due to ESG becomes more marked over a longer time horizon. A proxy model aggregating 1,000 studies suggests that with all else being constant, a long-term ESG focus is 76% more likely to find a positive or neutral result.3
  • It improves employee attraction and retention for those seeking to an employer whose values are aligned with their own. 80% of millennials say they want to work for socially responsible companies.4
  • It improves brand perception and loyalty, and attracts customers hoping to make a difference by voting with their wallets. 56% of consumers would pay more for a sustainable product.5

There is growing recognition that ESG factors are key drivers of value. Integrating these factors does not mean sacrificing returns. On the contrary, corporate profits and investment returns can actually be enhanced by adopting ESG principles. The MSCI Canada ESG Leaders Index outperformed the MSCI Canada Index in 10 of the past 12 years. This includes the period of volatility in Q1 2020.6 

These factors have likely helped convince 89% of plan sponsors to employ ESG principles in their investment strategy.8 There are also indications that access to sustainable investment options can improve plan participation and overall retirement outcomes. We found that 55% of Clients are likely to contribute more if their plan offered sustainable investing options.9

Sun Life’s experience

At Sun Life, our Purpose is to help our Clients achieve lifetime financial security and live healthier lives. Our approach to sustainability directly aligns to our business priorities and brings our Purpose to life. In 2019, we refocused our sustainability plan. The new plan is focused on our greatest opportunities to have a positive impact on society, while creating competitive advantage for our business:

  • Increasing financial security, including providing sustainable retirement income,
  • Fostering healthier lives, and
  • Advancing sustainable investing.

Key priorities and targets under our corporate plan include :

PRIORITIES TARGETS
Increasing the rigor of ESG integration into our investment processes and making sustainable investments. $20B of new investments in sustainable assets and businesses from 2021-2025.
Minimizing our environmental footprint and ensuring we are resilient against climate change risks. 30% greenhouse gas reduction by 2030 in corporate and investment real estate portfolios. Carbon neutral operations from 2021.
Promoting greater diversity, equity & inclusion. 50% women in Vice-President (VP)+ roles globally and 25% underrepresented ethnicities in VP+ roles in North America by 2025.

FIGHT, NOT FLIGHT:
OUR VIEW ON ESG INTEGRATION

  • Many people associate sustainable investing with the divestment of fossil fuels.
  • We don’t believe this the optimal approach. These companies are critical to the Canadian economy, and provide livelihoods to millions of people.
  • We support encouraging these companies to transform their business models to align to a more climate-friendly world.
  • Ultimately, we believe that engagement is more powerful than divestment.

Approaches to sustainable investing

Here is a summary of the primary approaches to sustainable investing:

ESG INTEGRATION

Embedding ESG data with traditional financial analysis of a company. This is the most common sustainable investing approach in Canada, and the approach Sun Life primarily utilizes.

DIVESTMENT

Exclude specific companies, industries or sectors based on personal values, ethical considerations, or negative ESG characteristics. Examples include: Socially Responsible (SRI) or Fossil Fuel Free fund.

SUSTAINABILITY FOCUSED

Focuses investing in specific areas, such as renewable energy, waste and water management, sustainable forestry and agriculture.

Group Retirement Services – driving sustainable outcomes

Within Group Retirement Services, these pillars encompass a range of products, services and innovations. You may already be familiar with many of these:

GRS: Driving sustainable outcomes

Sustainable investing

  • Proprietary ESG evaluation framework
  • Sponsor Review of ESG policies & investments
  • Thought Leadership, Insights & Advocacy

Financial security

  • Planalytics & Data Insights
  • Retirement Readiness
  • Decumulation Solutions
  • Digital Partnerships
  • Retirement Planning Tools & Advice

Healthier lives

  • myWellness Rewards
  • Wellness Bundle (includes Lumino Health Virtual Care)
  • Lumino Health
  • Mental Health Strategy

These pillars build on our foundation as a Trusted & Responsible Business:

  • Diversity & Inclusion Commitments
  • Paper to digital conversion
  • Reduction in carbon emissions
  • Privacy & cybersecurity principles

Here are some specific examples of how Group Retirement Services is advancing sustainability in our industry:

  • Conducting proactive conversations with plan sponsors to help them align their corporate sustainable strategy with their workplace savings plans.
  • Making it easy for sponsors to understand the current level of ESG integration in their plans.

As part of our ongoing governance activities, we evaluate and engage with investment managers on the following:

  • Firm policies (what do they believe in?) This includes ESG resources, reporting, diversity and inclusion practices, and continuous improvement efforts.
  • Investment process (how do they integrate ESG?) This includes qualitative and quantitative factors.
  • Active ownership (what do they do as investors?) This includes active ownership policy (engagement and proxy voting).

  • We’re working to embed sustainability through advocacy, through consultations with CAPSA to build ESG guidelines for CAP plans.
  • We’re engaging with the Department of Finance on proposals to integrate ESG factors in plan governance within federally-regulated pension plans.
  • We’re also consulting with regulators including OSFI, to offer input on recommendations for sustainable investment principles.

A closer look at our proprietary ESG evaluation framework

Sun Life Group Retirement Services is proud to offer a proprietary ESG evaluation framework. This robust framework is an extension of our ongoing investment governance activities. It identifies managers and funds who we believe are ESG Leaders. It also recognizes those who are evolving quickly.

A recent Sun Life survey found that 23% of Clients who purchased investments considered ESG factors.10 Among younger Clients aged 18-34, this increases to 38%.11 The framework has already classified many funds you may offer within your workplace plan as ESG Leader funds. These funds have proven to be popular choices among plan members, as seen in the summary below. Seventy-eight percent of Clients are interested in seeing more sustainable investments offered.12 

PLAN SPONSORS13

  • 89% of Canadian sponsors use ESG principles as part of their investment approach and decision-making.
  • 55% believe ESG portfolios are likely to outperform non-ESG investments.
  • 87% believe integrating ESG factors can help address risk.

INVESTMENT SOLUTIONS & FUNDS

  • 100% of our Core platform investment managers are PRI signatories.
  • 43% of Core investment fund families are classified as ESG leader funds.
  • ESG leader funds make up 54% of assets.
  • Sustainable investing options generally do not have higher investment management fees relative to traditional investment options.

In addition to the framework, Sun Life can offer the following support to plan sponsors:

  • Understanding the various approaches to sustainable investing.
  • Adopting a formal policy on your desired approach and helping document your selection of investment options for plan members.
  • Supporting the evaluation of your investment managers' efforts in ESG integration or dedicated sustainable investment products.

For plan members, we’ll integrate elements of the new ESG evaluation framework into each step of their journey. This allow for ease of understanding, application of ESG principles. We’re excited to share further details on the member experience over the coming months.

How you can start to build a sustainability strategy for your business

You may think your organization is too small – or too big – to put an effective sustainability strategy in place. Or, that this is simply not a good time to embark on a sustainability journey.

Companies may find themselves in different places on the sustainability continuum. While 60% of companies have a sustainability strategy, only 25% have developed a clear business case for their sustainability efforts.14 You may be just starting out or looking to re-evaluate your strategy. At every stage, we’re here to lend our expertise on sustainability to help you evaluate and define the opportunity for your organization. 

Here are the key steps to consider as you embark on your sustainability journey: 

  • Evaluate where you are on the journey

    As we’ve seen, you’re likely already employing sustainable practices within your business. Some areas may be more relevant than others, depending on the nature of your business.

  • Focus on what you know best

    These will typically be the areas of greatest impact. For example: a focus on mental health, diversity and equity, access to sustainable investments, green procurement or community relations. 

  • Identify key stakeholders

    Generally, investors, employees and customers are key, but there could be others, such as suppliers or the broader community. You can also work with government and within your industry to effect change. 

  • Align corporate and HR strategies

    Aligning corporate and HR strategies can increase engagement, productivity and innovation. Embed sustainability in your culture, values, branding, corporate voice, and the causes important to your organization. 

  • Mobilize senior leaders

    Creating partnerships and alliances with senior leaders can amplify and extend the impact of your program. It can help influence employees to get on board. It also fosters an emotional commitment to your strategy and values. 

  • Define and measure KPIs, re-evaluate

    Develop and deliver a sustainability program that includes prioritized initiatives, milestones, KPIs and measurable targets. Monitor and track progress, and re-evaluate if needed.

Although Sun Life has been a sustainability leader for some time, we believe we can do more to maximize our positive impact on society while creating business value. We’ve worked with various clients, at various stages, to implement a sustainability strategy and build more resilient workplace plans. While these clients have spanned many industries, and started out at very different points in the journey, all have been successful in their implementation. Although there are regulations that are currently being discussed, many organizations aren’t waiting for these to be mandated. They are being proactive in building resilient, sustainable plans – THE FUTURE IS NOW!

SOURCES:

1 Why COVID-19 is a litmus test for corporate attitudes to sustainability. World Economic Forum, October 2020.

2 BNP Paribas Asset Management survey shows Covid-19 prompts rise in social considerations within investment decision-making. BNP Paribas, July 2020.

3 ESG and Financial Performance: Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015 – 2020. NYU Stern Centre for Sustainable Business and Rockefeller Asset Management, February 2021.

4 Murray, A. America’s CEOs Seek a New Purpose for the Corporation. Fortune Magazine, August 2019.

5 CGS 2020 Retail and Fashion Sustainability Survey. CGS, July 2020.

6 Index data source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any data contained herein. The index data may not be further redistributed or used as a basis for other indices or any securities of financial products. This report is not approved, reviewed or produced by the index provider. Sun Life makes no representations or warranties about the completeness, reliability, and accuracy of the index source data. Any action you take upon reliance of the index source data is strictly at your own risk.

7 2020 Canadian RI Trends Report. Responsible Investing Association, November 2020.

8 2020 Responsible Investing Survey. RBC Global Asset Management, October 2020.

9 Sustainability & Importance of ESG Investing. Sun Life, April 202110 Canadian Market Research Study. Sun Life, January 2021

10 Canadian Market Research Study. Sun Life, January 2021.

11 Sustainability & Importance of ESG Investing. Sun Life, April 2021.

12 Sustainability & Importance of ESG Investing. Sun Life, April 2021.

13  2020 Responsible Investing Survey, Canadian Results. RBC Global Asset Management, October 2020.

14 Sustainability at a Crossroads: Progress Toward Our Common Future in Uncertain Times. MIT Sloan Management Review in collaboration with the Boston Consulting Group, May 2017.