PAID CONTENT

Countries across the globe realize that climate change is a systemic risk for economies, markets, and communities. By 2025, the impact of climate change will slow Canada’s economic growth by $25 billion annually, according to the Canadian Climate Institute. That’s equal to 50% of the country’s projected GDP growth.

To mitigate the impacts of climate change, Canada is working to achieve net-zero emissions by 2050. And the investment industry has a huge role to play to drive the transition.

But how can clients invest in the climate transition?

“As investors, there are three strategies we can put in place to contribute to the fight against climate change and working toward net-zero targets,” says Deborah Debas, Responsible Investment Specialist with Desjardins Group. “We can divest to minimize exposure to climate-related risks. We can invest in companies creating solution to decarbonize of the economy. And we can engage with the companies we have in our portfolios to influence them to set net-zero targets.”

While divesting from high green-house gas (GHG) emitters can make an investor feel good about avoiding “bad companies” and protecting their portfolio from some climate-related risks, it does little to actually mitigate those risks in the real world, she says. Investing and engaging are much stronger levers to bring about change in the real world.

And there are many investment opportunities in energy transition. Typically, clients will link the reduction of GHG emissions to renewable electricity. “There is a range of diversified investment opportunities, for example, in energy efficiency, transportation and agriculture,” notes Debas.

In fact, despite the inflation and supply chain disruptions, there was a 31% increase in investment toward many sectors related to energy transition in 2022, according to Bloomberg, tying the $1 trillion green energy investment with that of fossil fuels.

“Companies that market solutions to global issues are just the types of businesses your clients want to invest in.”

On top of that, government incentives are also fueling the energy transition, and creating tailwinds for many sectors. For instance, there are federal tax incentives in Canada for installing battery storage solutions, or solar or wind power sources at home or at the office.

“These solutions are paying for themselves,” she says. “Heat pumps, efficient motors or software that help optimize product design make business operations more cost-efficient in the long run, especially with the higher energy costs we’ve seen in 2022. Tax incentives also contribute to the growing demand. Companies that market solutions to global issues are just the types of businesses your clients want to invest in.”

Debas notes that Desjardins Investments is also putting a strong emphasis on engagement to achieve real emissions reductions as part of their support for the Net Zero Asset Managers initiative (NZAMI).

“What this means for our portfolios is that we aim to reduce our financed emissions as close to zero as possible by 2050, in line with global efforts to limit warming to 1.5°C above pre-industrial levels,” she says. “Engaging with portfolio companies to influence them towards setting their own Net Zero target and making the necessary investments to meet those targets will be crucial, as most companies must reduce emissions by more than 90%.”

She adds, “Our initial NZAMI implementation scope will be all of the SocieTerra fund lineup, and both the core and thematic funds will play a part.”

Desjardins is currently establishing interim targets to ensure progress is being made toward the long-term ambition, she notes.

Debas reminds advisors that clients who want to be part of the solution can benefit from the tailwinds that are being created by the global transition toward a more sustainable economy.

“Companies that are well positioned to thrive in this new environment may offer attractive investment opportunities,” she says.

Learn more about how to systemize your responsible investment approach at Desjardins’ webcast on Oct. 24, 2023.

Deborah Debas Responsible Investment Specialist with Desjardins Group

The Desjardins Funds are not guaranteed, their value fluctuates frequently, and their past performance is not indicative of their future returns. The indicated rates of return are the historical annual compounded total returns of the date of the present document including changes in securities value and reinvestment of all distributions and do not consider sales, redemption, distribution or other optional charges, or income taxes payable by any securityholder that would have reduced returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The Desjardins Funds are offered by registered dealers.

Desjardins®, all trademarks containing the word Desjardins, as well as related logos are trademarks of the Fédération des caisses Desjardins du Québec, used under licence.

PAID CONTENT

Advisors may be worried they don’t have all the answers when it comes to environmental, social, and governance (ESG) investing. But the key to explaining ESG to clients is to understand the fund and its intention.

“It’s not about understanding all of these companies within the fund,” says Deborah Debas, Responsible Investment Specialist with Desjardins Group. “It’s about understanding what the fund wants to do and what financial role it plays within a portfolio.”

The first step is to find out whether it’s a core or thematic fund. What’s the difference?

A core ESG fund is representative of the economy where it invests, explains Debas. For instance, it could be a U.S. equity fund or an emerging market fund. “These funds are diversified in all different sectors, they help you optimize returns over time, and they’ll have an ESG overlay, which is ESG integration that will orient security valuation and selection.”

She adds the intention of a core ESG fund is to identify companies of all sectors that are best equipped to manage ESG risks, and that work at making their operations more sustainable. For example, the company could be reducing its own waste, or source materials that are deforestation-free.

“We are also active shareholders and we aim to influence companies to improve their disclosure and practices,” she says. “All sectors need to improve their ESG practices. If we were to invest only in the solution, we’d only influence a small portion of the market.”

Meanwhile, many thematic funds are globally diversified but are focused on specific sectors. “The intention is to have a higher concentration of companies developing solutions to ESG issues, such as energy efficiency or precision agriculture solutions. They are seizing opportunities tied to the evolution towards a more sustainable economy,” she says.

As much as clients are usually very excited about thematic funds, it’s important to have both core and thematic funds in portfolios. “We’re protecting ourselves from risks through diversification with core ESG funds, and we’re working toward the solution with thematic funds.”

“We’re protecting ourselves from risks through diversification with core ESG funds, and we’re working toward the solution with thematic funds.”

Debas uses a metaphor to further explain the importance. Let’s say you’re selling a car and there are several buyers who are interested, she explains. You may stress different features to different types of buyers. For instance, for a family with three young children, you may point out that the back has room for three car seats. For an older couple, you may stress the security features. Still, each of these potential buyers would be leaving with the same car.

Advisors may be faced with high-conviction investors who want 100% thematic funds, but Debas cautions against that. “Advisors know it’s not recommended from a risk management perspective because the trade-offs in terms of diversification would be too heavy, and it would likely be unsuitable for most investors.”

Part of an advisor’s role is also to educate clients and manage their expectations.

“Clients want the feature and, in that case, it’s the thematic fund. But they still need the four wheels, brakes, and engine, which is the core. And that’s why both core and thematic funds are important. They’re all part of a well-diversified portfolio.”

Also, when analyzing companies to be included in a core or thematic fund, it’s important to know that there is no such thing as a solely ESG company or non-ESG company.

“It’s never black or white,” she adds. “It’s 50 shades of green. It’s about understanding that no company is perfect. All companies have somewhat of an impact on the environment and communities. The key is to invest in those companies that are positioned to try and minimize the negative impact, and work on improving the positive impact.”

Learn more about how to systemize your RI approach with Desjardins’ webcast series.

Deborah Debas Responsible Investment Specialist with Desjardins Group

The Desjardins Funds are not guaranteed, their value fluctuates frequently, and their past performance is not indicative of their future returns. The indicated rates of return are the historical annual compounded total returns of the date of the present document including changes in securities value and reinvestment of all distributions and do not consider sales, redemption, distribution or other optional charges, or income taxes payable by any securityholder that would have reduced returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The Desjardins Funds are offered by registered dealers.

Desjardins®, all trademarks containing the word Desjardins, as well as related logos are trademarks of the Fédération des caisses Desjardins du Québec, used under licence.

PAID CONTENT

While it’s been a few years since the Canadian Securities Administrators (CSA) reformed client-focused strategies, some advisors are still confused about how to incorporate Know Your Product (KYP) into their processes when it comes to environmental, social, and governance (ESG) investing. 

CSA’s guidance on KYP is designed to ensure that advisors have a thorough understanding of the products they recommend to their clients, explains Deborah Debas, Responsible Investment Specialist with Desjardins Group. “The KYP process is intended to help advisors identify the features and risks associated with a particular product, and determine whether it is suitable for their clients,” she says.

“There are no specific requirements in the KYP guidelines that tie that to ESG products. It really is the investment core of any type of investment and, in essence, Responsible Investment (RI) is just that — a type of investment.”

So whether it’s a guaranteed product, mutual fund, or exchange-traded fund, Debas says advisors must understand the objective, strategy, structure, features, and returns of each investment product they recommend.

All of these details and questions are answered in Desjardins’ updated mutual fund KYP documentation, which will be available throughout August. “In addition, to help advisors with their research and client conversations, we identify the ESG approaches used in each fund of our RI line-up on our KYP documentation,” she says.

The key to KYP is to ensure the product you’re offering to your clients answers their financial objectives, she adds.

But the first step of the client discovery process is to get to Know Your Client (KYC). And when it comes to ESG investing, there are some nuances for KYC. 

“If you’re actually able to connect KYC, KYP, and ESG, this is how you’re going to build more trust with your clients.”

“Remember, the question about ESG investing is unlikely to come from the client,” Debas says. “You should not confuse lack of questions for a lack of interest toward ESG because your client might not know this is available to them, or that you’re an advisor who’s qualified to offer these sorts of products to them.”

So advisors should mention the potential to invest in ESG to their clients during KYC. By taking the initiative of the conversation and asking more questions, she says that advisors show interest in their clients, and who they really are above and beyond their portfolios.

“You might want to ask them if they volunteer anywhere, or if they offer donations to some non-profit organizations in their region or in their community,” suggests Debas. “This is a good way to understand what’s important to them, and show them how their investment can actually work in the same direction.”

Once you have a better understanding of your client and their goals, including how RI products can help them meet those goals, then focus on KYP and discussing products that are suited for them. 

“KYC and KYP are two sides of the same coin,” says Debas. “You need to understand what your client wants, and their objectives and risk tolerance. Then, you’ll be able to offer them a product that’s suitable and addresses both their financial needs and their convictions.”

She adds, “If you’re actually able to connect KYC, KYP, and ESG, this is how you’re going to build more trust with your clients. And you’re also going to be able to increase your client retention and ability to be referred because you’re going the extra step. You’re offering new ideas and value, you’re including the investor in the choice of their investments, and you’re showing them how everything works together.”

Learn more about how to systemize your RI approach at Desjardins’ webcast on Oct. 24, 2023 and on DesjardinsFunds.com.

Deborah Debas Responsible Investment Specialist with Desjardins Group

PAID CONTENT

Your clients want Responsible Investment (RI) to become a holistic part of their portfolios. In fact, 82% of investors are looking to dedicate a portion of their portfolios to RI, according to the Responsible Investment Association (RIA). And 77% agree that companies with good environmental, social and governance (ESG) practices are better long-term investments, adds RIA.^[1]

The market has responded to this positive momentum, with over 40 new ESG Canadian mutual funds launched since the beginning of 2021. But with more products available now than ever before, it can be challenging for advisors to identify what makes each ESG solution different.

Only a small number of advisors are even broaching the subject with clients – 16% of investors state they’ve had a conversation about RI with their advisors, according to a 2020 Desjardins survey.* That means 84% of advisors are potentially missing out on a great opportunity.

To help advisors, Desjardins launched a Responsible Investing Certification Program. The program aims to educate advisors and help them take their business to the next level.

It answers key questions about RI and focuses on what makes RI strategies valuable for their clients’ portfolios as well as their own practices. Here are the areas covered.

1. Why is RI important now, and how does it work?

This section outlines why RI strategies were developed in the first place and why people are adopting them. It also details ESG issues, including how they can represent unforeseen risks and opportunities for investments, what strategies are integrated in the portfolio decision-making process, and how they impact portfolio construction. We also look into how investors can have an impact and address growing concerns about greenwashing.

2. How does RI potentially create value for your portfolio and practice?

Some may think you need to sacrifice returns if you want to include ESG solutions in portfolios. However, that’s a myth. The truth is you can invest responsibly without any compromise on potential returns.

This section demonstrates how ESG integration can be an invaluable tool to manage risk and identify opportunities that arise as the economy transitions.

It also includes a toolbox that’s accessible to all advisors who want to integrate RI into their practices. There are ready-made marketing materials and tools to help advisors guide their conversations, pinpoint their clients’ RI needs and curate the best-fitting solutions for them.

3. Direct access to portfolio managers

In this section, a Desjardins Fund’s portfolio manager (PM) shares their experience with one specific RI mandate, including its strategy, ESG assessment and security selection process. Advisors have the opportunity to ask questions directly to the PM and do their due diligence.

Additional details

The program takes 3.5 hours to complete and is provided online. Desjardins’ Responsible Investing Certification Program is recognized by the RIA as RI CE credits to maintain the Responsible Investment Specialist (RIS) designation.

Desjardins is able to educate advisors through its pre-eminent program due to its more than 30 years of RI experience. The Desjardins Funds manager, Desjardins Investments Inc., provides diversified options and has the broadest offering of RI products in Canada. As of year-end 2020, 88% of advisors who attended the program rated it as relevant or very relevant to their practices, and 99% intended to talk to their clients about RI.^[2]

RI provides a tremendous opportunity for advisors. Most clients want to learn more about it and are looking for qualified advisors to help guide their decisions. Desjardins is a partner of choice for any advisor who wants to incorporate RI into their practice.

Deborah Debas Responsible Investment Specialist with Desjardins Group

The Desjardins Funds are not guaranteed, their value fluctuates frequently and their past performance is not necessarily indicative of their future returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The Desjardins Funds are offered by registered dealers.

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* Desjardins SOM Investor Web Survey, held from November 25 to December 14, 2020, with 2,864 Canadian respondents. The margin of error is ± 2.6%, 19 times out of 20. ^[1] RIA: https://www.riacanada.ca/responsible-investment/ ^[2] Desjardins, internal data.

PAID CONTENT

Many clients continue to cite fees, growth potential and market uncertainty as key concerns. And with the cost of living increasing each year, your clients’ investments are reducing in value. It’s important your clients realize that simply saving isn’t enough—their savings need to retain value if they want to leave behind as much as possible.

Guaranteed investment funds (GIFs), also known as segregated funds, offer a solution.

GIFs are essentially investment funds that are issued by life insurance companies. These products address these concerns because they are guaranteed at maturity and death, and can help meet your clients’ investment objectives while protecting what’s important for them, whether it’s savings or estate planning.

Through the insurance contract, GIFs allow clients to designate beneficiaries. This simplifies the death benefit process, bypassing probate fees. So, in just a few days, beneficiaries get access to the funds upon reception of necessary documentation, such as the death certificate.

These products are suitable for multiple client profiles, especially: pre-retired and retired investors who are concerned about protecting their assets; self-employed clients because unregistered assets are also protected against creditors  (as long as the beneficiary is the ascendant or descendant, or is irrevocable); and younger investors because they can take advantage of the guarantees offered through resets.

Desjardins offers a variety of funds through the Helios2 contract, which has three different guarantees to address each of your clients’ needs.

• 75/75 guarantee: This option ensures the client is guaranteed for 75% of initial deposits at maturity (age 105). There’s also a 75% guarantee at time of death, which is paid to beneficiaries. This option offers growth potential and is most suited for self-employed workers, business owners and professionals. 

• 75/100i guarantee: Similar to the first option, this guarantees 75% of initial deposits at maturity (age 105). At time of death, the beneficiary is guaranteed 100%, as well as inflation protection up to the client’s 75th birthday through automatic annual resets. This option is most suited for clients who want their estate to be passed on quickly and easily. 

• 100/100i guarantee: This option offers comprehensive coverage. It guarantees 100% of first-year deposits (75% thereafter) as well as 100% at time of death. It also offers inflation protection up to the client’s 75th birthday through automatic annual resets. The maturity benefit can be reset twice per year at market value to capture market gains. This option is most suited for cautious investors that have shorter time horizons (15 years) and want to leave something behind.

If a client’s needs or circumstances change over time, they have the flexibility to switch between guarantees seamlessly.

Key benefits for clients

What makes Desjardins stand out is that it is the only issuer in Canada to offer inflation protection¹ through its 75/100i and 100/100i guarantees, which is especially important for clients today since there are concerns that inflation could rise higher. Even at traditional inflation levels, having inflation protection is beneficial since it protects the client’s death benefit.

Using top-tier, experienced internal and external investment managers, Desjardins monitors the funds’ performance through rigorous research to ensure attractive growth for clients. Desjardins analyzes not only performance, but also the investment philosophy and portfolio construction process of each individual solution it offers.

And Desjardins offers competitive fees. Last year, it reduced the management expense ratio (MER) on all of the funds on the platform, as well as the guaranteed fees associated with the 75/100i guarantee. Desjardins offers high-net-worth pricing: 30 basis points across all funds when the client’s assets reach $250,000. The program is automatic, so once assets reach that threshold, the client is offered a rebate on fees.

There is also flexibility on fees for advisors, with five different options. And Desjardins has added chargeback options on the first three- or five-year period. GIFs are the only product on the market to offer this kind of structure².

A focus on responsible investment (RI) is important both to Desjardins and to your clients. That’s why Desjardins added two RI portfolios last year and experienced a 75% increase in assets in 2020 alone³. Desjardins now has now a total of six RI portfolios.

As a result of its efforts and performance, Desjardins received seven FundGrade Awards last year. It was also one of the best-performing seg-funds on the platform, finishing third in 2020, with 74% of its GIFs assets under management held in above-average performing funds⁴.

Overall, the guaranteed aspect of GIFs compared to mutual funds and other investments is a key benefit for clients. As an investment product that offers growth potential and protection at maturity and death through an insurance contract, GIFs offer an incredible opportunity.

Philippe-Olivier Dumas Head of Product Development

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Legal note: DESJARDINS INSURANCE refers to Desjardins Financial Security Life Assurance Company. DESJARDINS, DESJARDINS INSURANCE and related trademarks are trademarks of the Fédération des caisses Desjardins du Québec used under licence.

An investment in principal protected notes may not be suitable for all investors. Important information about principal protected notes is contained in the Information Statement and the Oral Disclosure Document of each note. Investors are strongly encouraged to carefully read this documentation related to a note issuance before investing and to discuss the suitability of an investment in the notes with their investment advisor or dealer representative before making a decision. The documentation related to a notes issuance in particular is available on the summary page of that issuance. In the event of any inconsistencies or conflicts between this document and the Information Statement, the Information Statement governs. The offering and sale of notes may be prohibited or restricted by laws in certain jurisdictions in Canada and notes are not offered for sale outside Canada. Notes may only be purchased in the jurisdictions where they may be lawfully offered for sale and only through individuals duly registered and authorized to sell them. Past performance is not indicative of future performance. The return on principal protected notes is dependent on the change (which may be positive or negative) in value of the underlying assets during the term of the note and it is possible that there may be no interest payable to the investor. The return on a note cannot be established before maturity. Some notes may be subject to caps, participation rates and other limits which feed through to performance. The full principal amount of a principal protected note will be repaid at maturity only. An investment in notes is subject to certain risk factors. Please read the Information Statement and Oral Disclosure Document for complete details, including the precise formula for determining return on a note.

An investment in non-principal protected notes may not be suitable for all investors. The notes differ from conventional debt and fixed income investments; repayment of the entire principal amount is not guaranteed (other than a minimum of 1% of the principal amount) and will be at risk. As a result, you could lose substantially all your investment in the notes. The notes entail downside risk and are not designed to be alternatives to conventional debt or fixed income investments or money market instruments. Important information about non-principal protected notes is contained in the Base Shelf Prospectus, the Prospectus Supplement and the Pricing Supplement (collectively, the “Prospectus”) of the notes. Investors are strongly encouraged to carefully read this documentation related to a note issuance before investing and to discuss the suitability of an investment in the notes with their investment advisor or dealer representative before making a decision. The documentation related to a notes issuance in particular is available on the summary page of that issuance. In the event of any inconsistencies or conflicts between this document and the Prospectus, the Prospectus govern. The offering and sale of notes may be prohibited or restricted by laws in certain jurisdictions in Canada and notes are not offered for sale outside Canada. Notes may only be purchased in the jurisdictions where they may be lawfully offered for sale and only through individuals duly registered and authorized to sell them. Past performance is not indicative of future performance. The return on non-principal protected notes is dependent on the change (which may be positive or negative) in value of the underlying assets during the term of the note and it is possible that there may be no interest payable to the investor. The return on a note cannot be established before maturity. Some notes may be subject to caps, thresholds, participation rates and other characteristics which may be reflected in the performance. Since the notes are not protected and the principal amount will be at risk, it is possible that you could lose some or substantially all of your original investment in the notes. An investment in notes is subject to certain risk factors. Please read the Prospectus for complete details, including the precise formula for determining return on a note.

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¹ Desjardins Competitive Analysis, September 2021. ³ Source: Desjardins, September 2021. ⁴ Source: Desjardins internal data about SocieTerra Portfolios betweem December 2019 and December 2020 ⁴ https://www.fundgradeawards.com/2020/FundGrade-Awards-2020.aspx

PAID CONTENT

Many clients continue to put yield and downside protection among their long-term investment goals. Structured notes can provide either opportunity.

In fact, structured notes are suited for many types of markets and many kinds of clients. And that’s why these products are gaining traction among investors, accounting for about $93 billion¹ in invested assets (that is, structured notes and market-linked GICs) in Canada, according to Investors Economics.

Basically, structured notes are a subset of structured products. They are a debt instrument typically issued by banks and designed to give investors a certain level of downside protection. They offer a broad set of investment strategies, principal-protected or not.

Structured notes can be defined by 4 components: maturity, underlying asset, type and amount of protection, and payoff formula.

• Maturity – In most cases, structured notes maturities are between 2 and 7 years.

• Underlying asset – The performance of a structured note generally tracks the performance of an underlying asset—that is, an index, a stock, a basket of stocks, commodities, or foreign currencies—over the maturity period.

• Type and amount of protection – The amount an investor is protected against declines in the underlying asset. For principal-at-risk notes, as long as the underlying asset level isn’t below the protection level, the investor gets its principal (invested capital) at maturity, but losses can be incurred past this level. For principal-protected notes, the investor gets back at least its principal back at maturity.

• Payoff formula – The amount the investor receives over the term of the note if certain market conditions are met. There are 2 basic types of payoff structures: income and growth. Income payoff provides investors with a maximum return level limited to the aggregate of the coupon payments, fixed or contingent. Growth payoff gives investors a level of upside participation on the underlying asset.

When combined, these 4 components provide structured notes to take advantage of different market expectations or respond to specific investors’ needs.

Structured notes can be a beneficial addition to a portfolio. They can be used to either protect against or take advantage of specific market views. Their defined outcome and downside protection add customization and diversification to clients’ portfolios. Moreover, some clients will use them to play on investment themes tactically. In this situation, their attractiveness comes from the fact that the strategy would be hard and expensive to implement otherwise. 

Simplicity is key

With 3 decades of experience in the structured product space, Desjardins has become a key player, owning one quarter of Canada’s structured product market share. It’s the company’s focus on simple products that has contributed to its success: simple payoff formulas and simple types of protection. Meanwhile, the expansion of the product offering and the strength of the distribution network have earned Desjardins international awards since 2012 at structured products events, including the award for Best House, Canada in 2020 at the Structured Retail Products, Americas conference.

In summary, structured notes can add value to clients’ portfolios. Although these products are gaining traction in Canada, structured notes are still a niche product.  For these reasons, there is an opportunity for investors.

Frederick Tremblay Director, Equity Derivatives & Structured Products

To learn more about Desjardins Structured Notes, visit https://www.fondsdesjardins.com/structurednotes/market-insight/discover-desjardins-structured-notes/.

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An investment in principal protected notes may not be suitable for all investors. Important information about principal protected notes is contained in the Information Statement and the Oral Disclosure Document of each note. Investors are strongly encouraged to carefully read this documentation related to a note issuance before investing and to discuss the suitability of an investment in the notes with their investment advisor or dealer representative before making a decision. The documentation related to a notes issuance in particular is available on the summary page of that issuance. In the event of any inconsistencies or conflicts between this document and the Information Statement, the Information Statement governs. The offering and sale of notes may be prohibited or restricted by laws in certain jurisdictions in Canada and notes are not offered for sale outside Canada. Notes may only be purchased in the jurisdictions where they may be lawfully offered for sale and only through individuals duly registered and authorized to sell them. Past performance is not indicative of future performance. The return on principal protected notes is dependent on the change (which may be positive or negative) in value of the underlying assets during the term of the note and it is possible that there may be no interest payable to the investor. The return on a note cannot be established before maturity. Some notes may be subject to caps, participation rates and other limits which feed through to performance. The full principal amount of a principal protected note will be repaid at maturity only. An investment in notes is subject to certain risk factors. Please read the Information Statement and Oral Disclosure Document for complete details, including the precise formula for determining return on a note.

An investment in non-principal protected notes may not be suitable for all investors. The notes differ from conventional debt and fixed income investments; repayment of the entire principal amount is not guaranteed (other than a minimum of 1% of the principal amount) and will be at risk. As a result, you could lose substantially all your investment in the notes. The notes entail downside risk and are not designed to be alternatives to conventional debt or fixed income investments or money market instruments. Important information about non-principal protected notes is contained in the Base Shelf Prospectus, the Prospectus Supplement and the Pricing Supplement (collectively, the “Prospectus”) of the notes. Investors are strongly encouraged to carefully read this documentation related to a note issuance before investing and to discuss the suitability of an investment in the notes with their investment advisor or dealer representative before making a decision. The documentation related to a notes issuance in particular is available on the summary page of that issuance. In the event of any inconsistencies or conflicts between this document and the Prospectus, the Prospectus govern. The offering and sale of notes may be prohibited or restricted by laws in certain jurisdictions in Canada and notes are not offered for sale outside Canada. Notes may only be purchased in the jurisdictions where they may be lawfully offered for sale and only through individuals duly registered and authorized to sell them. Past performance is not indicative of future performance. The return on non-principal protected notes is dependent on the change (which may be positive or negative) in value of the underlying assets during the term of the note and it is possible that there may be no interest payable to the investor. The return on a note cannot be established before maturity. Some notes may be subject to caps, thresholds, participation rates and other characteristics which may be reflected in the performance. Since the notes are not protected and the principal amount will be at risk, it is possible that you could lose some or substantially all of your original investment in the notes. An investment in notes is subject to certain risk factors. Please read the Prospectus for complete details, including the precise formula for determining return on a note.

¹ As at December 31, 2020. According to Investor Economics, Retail Brokerage and Distribution Report, Canada, Winter 2021, and Investor Economics, Deposit Advisory Service, Canada, Spring 2021.

PAID CONTENT

As shareholders, we can influence the practices of the companies in which we invest. One of our most important responsibilities is to use our voice to shape how companies achieve their long-term objectives and improve their ESG performance.

We take a combined approach to responsible investing: we select strong financial performers that are best-in-class for ESG factors, as well as those making substantial progress in meeting their ESG goals. Both the selection process and our level of shareholder engagement are informed by ESG analysis. We work with companies that integrate the right practices and that we believe can become even better with our involvement.

Desjardins has a dedicated team for each sector in which we invest. These teams define material ESG issues to analyze and then add specific priorities for companies to focus on, such as climate change or gender parity. These issues and priorities are included in our shareholder engagement strategies.

How do we make an impact as investors? By employing the three strategies below.

Exercise voting rights

One prime opportunity to make a difference is at the annual shareholder meetings of the companies held in Desjardins investment funds and portfolios. We are proud to exercise our voting rights and consider it our duty to take a stand on the proposals submitted. We vote in line with our values and those of our partners and clients.

One of our values is gender diversity: is there female representation on the board of directors? In keeping with our policy on proxy voting rights, we voted against the chairs of the nominating committees and boards of directors on 291 occasions because they had fewer than two women on the board and no female candidates.

Proxy voting can also pave the way for productive conversations on other issues. For example, after we voted against a specific CEO compensation plan, the company reached out to us for more insight. Acting on the recommendations of Desjardins and other investors, the company eventually made several changes to its compensation structure, bringing it in line with industry best practices.

Start a dialogue

Another way to drive change is through shareholder dialogue. By helping companies approach issues proactively, we can improve their risk management practices and avoid vote battles before they occur.

Dialogue happens on multiple fronts. Our RI team and portfolio managers meet jointly with a corporation’s senior management or board. We also engage with the sustainable development teams of the companies we invest in, which allows us to home in on specific ESG practices.

This is an innovative approach that allows us to speak to leadership directly on the issues that can affect their company’s value. Seeing the RI, equity and fixed income teams together sends a powerful message. It shows that we’re speaking with one voice and are ready to explain the positive correlation between ESG practices and broader results.

Our approach leads to constructive outcomes. Academic research on corporate social responsibility shows that shareholder dialogues can result in improved governance and financial performance. Our own experience shows that companies often follow up with our teams as they implement their ESG strategies.

For example, after our discussions with the C-suite from a REIT, the firm subsequently demonstrated its commitment to ESG integration by hiring a VP of Sustainability and publishing its first ESG report. That’s progress.

Engage with public decision-makers

Lastly, we participate in discussions with public decision-makers, including regulators and legislative authorities, advocating for better ESG disclosure and integration requirements. It’s yet another tool we can use to encourage the companies in our portfolios to improve their ESG practices and to integrate them fully into their operations.

Shareholder engagement is rapidly becoming an effective way to help companies have a positive impact on society and the environment, all while optimizing their returns. That’s what RI is all about.

Solène Hanquier Senior Advisor, Responsible Investment with Desjardins Global Asset Management

To learn more about Desjardins RI solutions, visit https://www.desjardinsfunds.com/ri.

Desjardins is a trademark of the Fédération des caisses Desjardins du Québec, used under licence.

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When evaluating investment opportunities, many benchmarks count. An increasingly significant one is the degree to which an organization’s leadership is diverse.

At Desjardins, we look closely at the composition of the board and management. Companies that are diverse at those levels also tend to be more diverse at the employee level. We understand that diversity means more than gender. While we’re specifically tracking female representation, gender diversity is associated with other types of diversity across a company.

That’s tremendously important to us. For one, when it comes to RI, a company’s makeup should reflect society’s. Moreover, diversity is correlated with financial performance.

For instance, studies have demonstrated that companies with greater female representation on their boards outperform their less gender-diverse competitors.¹

The Responsible Investment Association notes that companies founded and co-founded by women generate 10% more cumulative revenue over a five-year period. And just a 1% increase in ethnic diversity is associated with an average 4% increase in revenue across Canadian companies.

We’re focused not just on diversity but also on encouraging strong inclusion policies. How do people across the company have a voice? What’s the organizational culture? How are different perspectives welcomed?

RI concentrates on companies that are best-in-class in ESG criteria and that are strong performers, too. Diversity and inclusion is part of how companies govern themselves. That’s usually our first insight into a company. How it fares in this area can be critical for long-term performance.

What’s the link? Diverse companies don’t limit themselves. They’re open, attracting the best talent from every background and experience. Research indicates that diverse groups make better decisions than homogeneous ones.² Companies with robust diversity and inclusion practices also tend to have higher employee engagement and less turnover. They’re companies where everyone can contribute to their full potential.

As recently as 2015, women represented just 18.3% of board members of S&P/TSX companies. Last year, that number was 27.6%, and the pace is accelerating. A sample of 100 of Canada’s largest publicly traded companies showed that 49% of new board members are women and half of all boards have adopted a diversity target.

The 30% Club is a UK-based initiative that aims to increase gender balance on boards and in senior management for companies worldwide. As an RI leader and a member of the Canadian chapter of the 30% Club, Desjardins routinely meets with company leaders on the topic of diversity. We talk about programs that promote better representation and how to counter biases (conscious and unconscious) that can hold back the recruitment and advancement of women in decision-making positions.

As much as RI should have a positive impact, it remains an investment. Diversity and inclusion are definitely part of a healthy society and of healthy companies. Investments that reflect those companies are part of a healthy portfolio.

Deborah Debas Responsible Investment Specialist with Desjardins Group

To learn more about Desjardins RI solutions, visit https://www.desjardinsfunds.com/ri.

¹ The CS Gender 3000: The Reward for Change, Crédit Suisse, Research Institute, September 2016 ² https://www.forbes.com/sites/eriklarson/2017/09/21/new-research-diversity-inclusion-better-decision-making-at-work/#576e11c94cbf

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Our planet’s resources are finite. We don’t always act like they are. Depending where we live, we would need two, three, maybe up to five Earths to support our resource use and lifestyles.

That’s why it’s vital to shift from a linear economy to a circular one. The linear model for production and consumption relies on an intensive use of resources. The waste ends up in a landfill, an incinerator or nature. Canadians generate an average of 720 kg per capita of unreclaimed waste each year. Globally, even with all the advances in environmental responsibility, only 19% of residual materials are recycled or composted.

We can’t keep going at this pace using linear thinking. The circular model, instead, focuses on lower resource extraction, an optimized use of resources, and the reuse, reconditioning and recycling of products consumed. Doing so is good for the planet – and smart business for companies and industries, too.

Responsible investing (RI) focuses on companies that are financially sound and are also best-in-class in environment, social and governance (ESG) criteria. Companies that do well in these three areas show care for their people, clients, suppliers, communities and the broader world. That tends to translate into longer-term success and better financial performance.

As the economy rebounds, we think RI is a solid bet. At the forefront are companies that embrace the circular economy concept.

These are companies that think carefully about how resources are extracted, how their products are built with ecodesign, how they’ll be used during their lifetime and what happens to them in the end.

The circular economy isn’t just about becoming more sustainable. Or about giving everyone on the planet an opportunity to improve their well-being and standard of living. It’s simply good financial and risk management to operate this way.

Consider what happens when resources become scarcer and more expensive and when there are market costs like taxes on carbon. Companies have strong economic incentives to reduce their footprint and to reuse and recover whenever possible.

Metals and plastics are two industries with great potential. On a company level, if you’re looking at best practices, I can point to Trex. It’s part of the Desjardins SocieTerra American Equity Fund. Trex makes and distributes alternative wood-composite products for decks. The company uses recycled wood fibre and plastic waste, making it one of the leading plastic recyclers in the United States.

Sustainability is an integral part of the company’s business model. Trex aims to reduce resource use, while capitalizing on the financial advantages of its low input costs.

That’s progress. The companies that are leading the way in the circular model demonstrate innovation. They think more about tomorrow and the transformation of the economy, solve real problems, and respond to consumer needs.

More and more people are eager to do business with companies that have such a dynamic and enlightened approach. Those are the companies worth investing in as we seek a more prosperous and sustainable future.

Denis Dion Responsible Investment Product Manager with Desjardins Group

To learn more about Desjardins RI solutions, visit https://www.desjardinsfunds.com/ri.

Desjardins is a trademark of the Fédération des caisses Desjardins du Québec, used under licence.

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The economy has been hard-hit. Will the focus now be on a fast recovery or a different kind of recovery?

The situation calls for reflecting on responsible investing (RI). Canada, along with the rest of the world, isn’t just in the midst of economic upheaval — it’s in the midst of a broader shake-up. Environmental, social, and governance (ESG) factors are at the forefront.

We see the concerns about how we treat the planet, run our organizations, and care for our employees — and how companies engage with their communities. All of these are elements of ESG, which RI takes into account.

These criteria tell us a lot about how a company operates, what it values, and how it leads. All that can have a material impact on its performance.

RI isn’t just about protecting resources; it’s about managing issues that can have a negative impact on investments. One reason why many institutional investors started to incorporate ESG criteria was to better manage risks.

As we’ve seen from the current pandemic, we can’t always predict a crisis. But we can be prepared for one. Companies with solid ESG practices were better equipped to face the COVID-19 pandemic, and their risk management helped weather market volatility.

Investors are looking at how organizations have reacted to the pandemic. How have companies dealt with, and responded to, their stakeholders such as their employees and suppliers? How have they adjusted to what’s happening in the most effective and positive ways? These are critical questions.

We often hear that a post-COVID-19 world should be more inclusive and should strive for the greater good. RI has been championing that for years, by focusing on companies that take ESG issues to heart.

A fairer recovery will feature companies that don’t exist in a bubble, isolated from the world around them. We believe the companies that will succeed will be the ones that are not only fundamentally sound but also mindful of their impact.

Any crisis is an opportunity to examine what matters to you. That’s true for individuals and companies. Sometimes you shift your priorities, and other times you recommit to them.

As the economy recovers, advisors can convey to clients how RI may bolster the recovery of their own finances. This is a time to reassure clients that ESG and financial performance can go hand in hand.

With RI, investors are in a position to reach their long-term objectives and meet their personal interests. The companies you’re betting on remain committed to high ESG standards, often act as model corporate citizens, and are well positioned for the rebound.

An RI approach can contribute to a recovery that works for all of us, and to a fairer and more sustainable future.

Deborah Debas Responsible Investment Specialist with Desjardins Group

To learn more about Desjardins RI solutions, visit https://www.desjardinsfunds.com/ri.

Desjardins is a trademark of the Fédération des caisses Desjardins du Québec, used under licence.