Highlights from the 2025 Scotiabank Sustainability Summit

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Patrick Bryden: Welcome to Market Points. I’m Patrick Bryden, Managing Director and Global Head of Thematic and Sustainability Investment Research at Scotiabank. On June 10^th and 11^th, 2025, we hosted international asset managers, investors, academics, and corporate leaders at the 7^th Annual Scotiabank Sustainability Summit in Toronto.

I can’t believe it’s already been seven years. I’ve been a part of the Sustainability Summit since the beginning, and I can tell you this year was a year like none other. The current geopolitical environment set the stage for lively debate and provided the catalyst for many of us in Sustainable Finance and Global Equity Research to refocus on the fundamentals and the real impact of sustainability on economic growth, risk management, and the investment process.

On this episode of Market Points, my colleagues and I reflect on some of our favourite moments from the 2025 Sustainability Summit.

We’ll hear from Scotiabankers, Melissa Menzies, Cambyse Parsi, Daniel Gracian, Benjamin de Wit, Zeeshan Nayani, and Patrycja Drainville later in the episode. But first, I’d like to talk to you about my personal favourite that really got to the heart of the matter.

If this year’s summit had a theme, it certainly was the future of sustainability, which was the topic of our opening panel featuring Martin Grosskopf, VP and Portfolio Manager from AGF Investments; Michael Jantzi from the International Sustainability Standards Board and former CEO of Sustainalytics; Deborah Ng, Head of ESG & Sustainability at Grantham, Mayo, Van Otterloo & Co.; and Stern School of Business at NYU Finance Professor and ESG skeptic, Aswath Damodaran.

Now, I grew up in a house with four boys and most of the time it was like Lord of the Flies, and the dinner table was a place for lively debate. So perhaps that is the reason I loved moderating this particular panel. And like my brothers, Professor Damodaran certainly did not pull any punches.

Aswath Damodaran: When you talk about sustainability, what version of sustainability are we talking about? Are we talking about sustaining the planet? Planet sustainability, which I think we all share is a common objective. Are we talking about product sustainability? A very different concept? Are we talking about business sustainability?

You think they all go together. But, not necessarily. I can give you examples of a company that makes a more sustainable product but essentially goes out of business as a company.

Let’s say Gillette, right? Let’s assume you can make a sustainable razor blade, a blade that you never have to throw away. Great for the planet, right, but terrible for the company. So, by leaving things fuzzy, it might serve your purposes, but it makes people cynical about what you’re trying to measure. You want to be a more sustainable company, except the fact that you have to be less profitable.

And don’t give me anecdotal evidence. I can give you counter anecdotal evidence. Collectively, being more sustainable or paying heed to ESG will make you a less profitable company. And I think we have to start with that. And if you’re an investor, this is going to create huge issues for you. We talked about the fiduciary responsibility you have as investors.

If you have a fiduciary responsibility as an investor and you decide on your own to go into adding sustainability and ESG constraints, you are going to actually lower your returns. I mean, it’s a very simple optimization problem. An unconstrained optimal will always deliver a better result than a constrained optimal.

In what universe can you add sustainability and ESG constraints and tell me that your constrained optimal is better than your unconstrained optimal? So, we have to accept the fact that if you decide to take the sustainability and ESG route, you are going to get a lower return on average over time.

Patrick Bryden: So, that was what the “Dean of Valuation” had to say about what he sees as some of the challenges with ESG and sustainable investing. The counterpoints were equally as vigorous on the other side of the debate, and other panelists definitely tried to take him to task. Here’s Michael Jantzi.

Michael Jantzi: But there was a quote, which is unattributed, and you’ve probably heard it, but it’s a quote that I have referred to many, many times over the course of my career, and it’s sustained me at some challenging times, especially in my former life when I was a CEO of Sustainalytics building a business. And the quote is, is this: “First they ignore you, then they laugh at you, then they fight you, and then you win”.

And so, I think probably all of us on this stage have been ignored. We’ve been laughed at, and the fight is now on in this space. That quote helps me place where we are right now because I’ve long believed this is just a process. This is a reflection of what is now a maturing industry.

The fact is that we’re growing up and it is complex and there’s a lot of ambiguity in all those things around it, but that’s what I would expect at this point in the cycle. And it’s a lot more fun to be navigating these challenges than it is to be ignored. So that’s the perspective I bring to this.

The fact is the fundamental, the core, premise of sustainable finance has remained intact from my perspective, which is that material sustainability-related risks and opportunities can affect an entity’s prospects over the short, medium, and long term.

Patrick Bryden: I know as the summit organizer and enthusiastic participant, this meaningful dialogue and debate on the future of sustainability was a great way to kick off the panel discussions and lead to a lot of engaging conversations at the cocktail party later that evening. We believe these different viewpoints are representative of the broader marketplace whereby there are different constituents with different investment strategies.

In our view, some of the pushback to sustainable investing in recent years has been valid. Everything tends to cycle in markets, and while there have been headwinds of late, we expect a significant portion of the marketplace to continue to adhere to sustainability principles in the investment process, particularly given it’s underpinned by secular trends that we do not expect to go away anytime soon.

Melissa Menzies: I’m Melissa Menzies, Director of Sustainable Finance at Scotiabank. Artificial intelligence requires an immense amount of energy. With AI becoming more and more pervasive, how will we meet its power demand?

One of my favourite panels at the summit this year was AI data centers power and emissions, featuring an incredible lineup of speakers. Jane Bird, Senior Vice President of Sustainability Management at Brookfield Renewable Partners; Christina Fung, Senior Vice President, Consulting Services at CGI; Kris Aksomitis, Director of Commercial Power Development & Strategy at Power Advisory; and Alex de Vries, the founder of Digiconomist, a platform that conducts research into the unintended consequences of emerging technologies.

Alex de Vries shed a lot of light on the actual energy consumption coming from AI and the likely impacts on global emissions.

Alex de Vries-Gao: So, what I found is that the power demand of AI by the end of last year was probably already equivalent to about well 20% of total data center electricity consumption around the globe. So, this is the data centers for all purposes. AI represents 20% of that total power consumption number.

And then in this case, we’re talking about 20% of 415 terawatt hours of electricity consumption, which is in itself maybe not a meaningful number, but this ultimately comes down to as much power consumption as a country like the Netherlands, my home country, in total. That was by the end of last year.

And I also found that through this year, this number can double again. So, by the end of this year, we could be talking close to half of all data center electricity consumption ultimately being used for just AI. And that means we’re essentially going to be adding another the Netherlands in terms of power demand for AI on the global grid somewhere this year alone.

So, I think there’s a big challenge here in translating power demand to environmental consequences. I will note that in general, because this growth is so fast and so massive that is going to probably drive up the reliance on fossil fuel. Simply because in general, we are already in energy transition. We are prioritizing renewables as much as possible. And renewables are also generally only a limited part of our total power capacity.

Melissa Menzies: So, we have energy consumption ramping up at incredible scale, coupled with the development of renewable energy sources that will not keep pace, and how could they? Global data center demand is expected to grow two and a half times by 2030 from present day with hyperscalers and AI data centers becoming the most common models for the future.

It seems to me that there is an opportunity to develop energy- and resource-efficient solutions at the supply level that will greatly reduce the energy needs of the data centers powering AI technology. And of course, this underscores the need to ramp up capital deployment into sustainable energy infrastructure around the world.

In the meantime, Alex left us with this to consider on the demand side.

Alex de Vries-Gao: Some of these models use a lot more power than others, so then you can start making some responsible decisions. But again, you need data for that first. Whenever you are thinking about potentially using AI you can also take a little bit of a step back and think about the problem you’re trying to solve before you just force fit a solution like AI on it.

Because you know, this happens a lot with emerging technologies where there’s a lot of buzz surrounding this technology and people start using it for everything. It’s kind of like, hey, you have a hammer, you start looking for nails. But it is just not always the best solution. So probably 9 out of 10 times it’s not AI. So that’s, that’s a little something you can do. But I think the real mitigation will not come until we get better data to make really effective decisions on.

Melissa Menzies: A profound statement. Certainly, something to consider that we may be overlooking. I know I’ll probably think twice next time before opening ChatGPT. Although experimentation is key to understanding AI and unlocking its power in new areas, it’s highly likely that this massive projected demand growth ultimately becomes a major factor in supply-side power solutions as we continue to decipher and understand its real world, GHG emissions impacts and other key environmental and social considerations.

Cambyse Parsi: I’m Cambyse Parsi, Director of Sustainable Finance at Scotiabank. Sustainability is about more than climate change and renewable energy. It’s a framework that looks to build lasting global prosperity across generations by aligning our economic systems with the health of people, places, and the planet.

So, at this year’s Sustainability Summit, one of my favourite panels was the one entitled Advancing Indigenous Economic Reconciliation. The panel featured three incredible guests: Tabatha Bull, President & CEO of the Canadian Council for Indigenous Business; Michael Bonshor, Board Chair of the Canadian Indigenous Loan Guarantee Corporation; and Clint Davis, CEO of Cedar Leaf Capital, Canada’s first majority Indigenous owned investment dealer.

Mike Bonshor really helped frame the discussion by considering how we use the term reconciliation. He proposed a more constructive approach to address economic growth and development across Indigenous communities.

Michael Bonshor: I think part of the challenge is that it’s become kind of a homogenous term, intended to mean something collectively.

And I don’t think we can look at it that way. I think First Nations have a perspective on – Indigenous community has a perspective on – what they’re working towards. And from a First Nations rights and title perspective, or from a treaty rights perspective, they’re looking for a time and place where their title and rights meets economic opportunity.

That’s what they’re working towards. And by and large, there’s still a gap there. I think government uses the term reconciliation as well, different levels of government, and I think they look at it from the standpoint of, you know, where their jurisdiction and where their responsibility meets opportunity too.

But it’s different. I would say that’s a different perspective. And, oh, the guy from NYU kind of stirred the pot, so I don’t mind saying some things. From an industry standpoint, you know, that’s where I’ve been probably the most discouraged, to be honest.

And from the standpoint of it can become a marketing campaign. It can become this year’s brochure. And I think that’s at the far end of the spectrum in terms of where we don’t want to see it go in terms of driving tangible change. And so, in where the spaces that I work in, including the Loan Guarantee Corporation, I prefer to use the term “reconstruction”.

Economic reconstruction. Because I think that’s the kind of language that we need to consider and use when we’re talking about shaping or reshaping the Canadian economy.

Cambyse Parsi: Mike and the Canadian Indigenous Loan Guarantee Corporation are certainly moving things forward on reconstruction. The corporation announced its first guarantee in May of this year, providing a loan guarantee to support an equity investment by a group of thirty-eight First Nations in British Columbia to acquire 12.5% ownership interest in Enbridge’s West Coast system.

The loan guarantee was used to support a $400 million bond offering that achieved AAA rating from DBRS, effectively tied to the federal rating.

This combination helped achieve competitive and low-cost funds for the Indigenous groups and helped support their investment into the assets that will return to them sustained economic benefits.

We also learned about increased collaboration coming from the private sector. Tabatha Bull provided a great example of the impact that mutually beneficial economic relationships can have when corporates, communities, and government work together.

Tabatha Bull: Maybe I’ll just jump on the Clearwater deal story because, so originally when the Clearwater deal went through, First Nation Finance Authority was able to provide a loan of $240 some million that supported the seven communities in the territory to purchase the fishing rights and licences that were Clearwater’s, which also to talk about self-determination and self-governing for those communities to be able to own those rights in that territory is an exceptional story of reconciliation.

And Premium Brands who partnered with them so that they could buy 50% of the equity loaned them $240 million or something at 10%. And then when First Nation Finance Authority was able to raise additional funds, Premium Brands allowed the communities to refinance a hundred million dollars of that loan at 4.2%.

That’s seven communities who then are able to just change their cash flow into their community. And Chief Terrance Paul I think was quoted to say that meant $3 million a year into his community. That is the story about the ecosystem that’s required from industry, from corporate Canada, and from these organizations like FNFA.

Cambyse Parsi: These transactions are more than a financing story. They’re examples of respect, reciprocity, and long-term thinking. It’s not just about investing alongside First Nations, it’s about stepping back, it’s about listening, and collaborating on community ownership on fair terms.

That kind of partnership doesn’t happen by accident. As Clint Davis from Cedar Leaf Capital reminds us, meaningful collaboration with Indigenous communities starts well before the paperwork by showing up, by doing your homework, and by recognizing the value Indigenous partners bring from day one.

Clint Davis: From a business perspective, looking at forging partnerships with Indigenous communities, first thing, first and foremost, and all of you who work in business yourself, if you want to approach, you know, a new partner, a new client, new customer, you do the research on them, right? So, start with that. Start with the research on the community. Get a good sense of what their governance structure looks like. Is there a modern land claim? Is it historical treaties? Do they have a development corporation? Are there any issues that are in the press that they’re advocating for? What are their priorities in their recent election?

Just get a really good sense, and get the name right too is another thing because I’m Inuit and I don’t know how many times I’ve been referred to as Innu. And Innu are incredible First Nations people in Eastern Quebec and Northern Labrador. And so, just get the names right. And if you, if you have a hard time trying to get it, just talk to somebody and you know, we’ll be able to share that with you.

The other thing is, speak with the right people. You normally start with if they have a development corporation or an economic development officer, start with that person.

Everybody thinks they have to go to the political leader. Chances are you’re not going to get on their agenda anytime soon because they’re dealing with a wide array of issues. Start with talking to the right person. And the right person is somebody who is mandated to kind of develop responsible business within their community.

The third is, and this was actually quoted by Michael Sabia today in the Globe and Mail, which I thought was absolutely very insightful, which is: be there in person. Go and spend some time. That’s when the trust really gets established. And Michael Sabia talked about that today. He’s the CEO of Hydro Quebec. Which is one of the largest utilities in North America. And he talked about, and Tabatha probably knows about this intimately well, but about the amount of travel he’s been doing in communities, speaking to leaders, spending that time. And he said there’s nothing like in-person meetings to really develop that level of trust. Speak less and listen more.

And then finally, which I think many of us or many businesses maybe kind of miss at times, but start with collaboration versus the sales job, right?

So just don’t go in and just say, we got the project. We’re going to walk down the road of trying to get regulatory approval. So now I’m going to sell you to try and get on board versus let’s collaborate, we see you as a real viable partner. You’re not simply a passenger, but you’re bringing value to the relationship as well.

Daniel Gracian: I’m Daniel Gracian, Director of Sustainable Finance for Latin America and the Caribbean at Scotiabank. Given Scotiabank’s strong presence in Mexico, I was especially excited for an interview with Yunuen Hernandez at this year’s Sustainability Summit.

Yunuen is Director for ESG Control and Monitoring at the Undersecretary of Finance and Public Credit for the Government of Mexico, and she has been playing a critical role in the development of Mexico’s sustainable finance framework and issuance program.

By looking holistically at sustainability and building in sustainability into federal budgets, Mexico has built a reputation as a global leader in sustainable finance, particularly among developing economies.

Given the other panel’s concentration on climates, it was very interesting to learn more about how Mexico balances both the social and green elements of sustainability through their programs.

Yunuen Hernandez: Well, the rationale of why our bonds are linked to SDGs is because our federal budget is linked at the federal programs, how they contribute to the SDGs targets.

So that was like the rationale behind why our framework is built upon the 2030 Agenda, and because also Mexico has this governance and the National Committee of the 2030 Agenda, technical committees where we follow up and monitor the policy around sustainability with other ministries. We also incorporate in our framework that we have receiving pretty positive feedback on our geospatial criterion.

It’s been recognized to be very innovative. In the sense that this geospatial criterion, it’s a tool that identifies how the social programs are being allocated to the most vulnerable regions in our country.

We cannot focus only on the climate agenda. Mexico has social challenges to reduce gaps. So, it makes sense that why actually our first SDG bond was linked only to social SDGs, like for instance, education, health. And it was during the pandemic year, and after two years, we started incorporating green SDGs, you know, biodiversity, climate change, energy, et cetera.

So, this is like our narrative that we need to push towards sustainability, which is green and social at the same time.

Daniel Gracian: That first SDG bond Yunuen referred to, that wasn’t only Mexico’s first. It was the first of its kind in the world. As a global leader in sustainable finance, Mexico has become a reference to guide the way through the current challenges facing the market.

And in our conversation with Yunuen, she thoughtfully advised us to keep a long-term perspective to navigate political cycles.

Yunuen Hernandez: Despite this anti-ESG news and so on, what we perceive is that it’s natural, the country adapting to the current political point of view.

But there is still demand on those instruments and even though we’ve seen this on the supply side, significant decrease, at least in this year, we know that there is appetite for these instruments, so that’s why we’ve been able to tap international and local markets with these instruments.

I think that the sustainable finance should not be seen as a short-term strategy but rather has to be long term in order that political cycles do not affect your sustainable finance strategy. So, a way to do so is doing a long-term strategy such as like the sustainable financing mobilization strategy, targeted to 2030, for instance.

Daniel Gracian: At the end of the conversation, we asked Yunuen for her thoughts on what we all need to be thinking about as we continue to build out our own sustainable finance programs and strategies across public and private sectors, and she gave us these five key takeaways.

Yunuen Hernandez: I think it’s important, first of all, that your strategy has to be accountable. Showing accountability through the reports.

The second point, I will say, transparency along the whole process is key. To show, not when you’re structuring at the bond and tapping the market, but also in the post-issuance phase.

Third, I would think it’s key to enable and promote information, access to everyone on the ESG side so everyone is well informed when taking decisions. So, we need to share this knowledge to everyone.

Four, I would say, the standardization is key to talk everyone in the same language and not because you want to compare to others and become competitive, I would say it’s just to become a reference. And also, for you to see if you, whether you, are not doing the right things or seeking for opportunity areas of improvement in your strategy.

And finally, building capacity. Again, in order to push toward this agenda, we have no time to slow down the pace on the efforts made, but we need to care a lot on building capacity across the different sectors, so we talk all in the same language and push in the same direction.

Ben de Wit: I’m Ben de Wit, Equity Research Associate at Scotiabank.

Our first keynote conversation of the Summit this year was an interview with Jackie Forrest, the Executive Director of ARC Energy Research Institute and the co-host of the ARC Energy Ideas podcast.

We covered a lot of topics over two days at our summit, but Jackie raised some important points within her keynote that were potentially a bit unexpected for some people to hear, specifically that the outlook for fossil fuel demand looks stable or even growing.

And that while some investors might have dismissed opportunities to invest in conventional energy because of concerns about their emissions in longer-term suitability, we are seeing the tone from governments and across markets change to one that’s more greatly prioritizing energy security and reliability, particularly as aggregate global energy demand continues to grow.

Jackie Forrest: History has shown us that it takes a long time to change our energy systems because we have so much momentum in the system. So many investments have been made that rely on the types of energy that are used today that it’s not easy to change them overnight. 

So, you know what? Coal is a great example. Everyone thinks coal is dead. Well, actually, we use more primary energy from coal than we do from natural gas today by quite a bit. And coal hasn’t peaked. And I actually don’t think coal’s going to peak in the next few years because we’re still seeing quite a bit of investment in new coal in places like India and China. 

So, coal is not dead. And we just added clean energy on top of the fossil fuel system, which is growing rapidly, but still relatively small because 80% of our primary energy actually comes from oil, gas, and coal today, and only 20% from clean energies. 

Ben de Wit: Jackie’s comments seem to highlight the changes in approach we’ve seen recently in Canada and in many other countries as well. As we all appear to be navigating a balance between goals of achieving net zero over the longer term, growing our economies, and also understanding what alignment with global trade partners might look like going forward.

Historically, Canada’s economy has been heavily resource dependent, and while the recently passed, Bill C-5 appears to be focused on ramping up the ways we leverage our traditional strengths and prioritize getting things done. I think it is fundamental to think about how Canada finds a balance in the longer term that considers what the incentives are for investing in Canada and diversifying the opportunities available within our economy.

Jackie further highlighted a few particulars later in her keynote conversation that touched on this.

Jackie Forrest: Well, you know, first of all, for these big major projects, Canada has a trust issue to get over in terms of attracting big private capital back to this country. A lot of, as I said earlier, a lot of people have come, spent money, and found that Canada isn’t really open for investment, and we have to change that.  

And so, this bill is really important. This signal to the market that the federal government supports the development of major infrastructure projects is going to be critical to bringing capital back, but I don’t think in itself it’s enough. I do think we have a real policy pancaking mess. You talked about it earlier. We have to fix some of the underlying policies.  

I’ll give you an example. Let’s say I’m right, and I hope I am, that LNG export facilities are part of these nation building projects. So, what you’re going to do is put a green light on the exporting of gas off our West Coast, which is good. It diversifies us away from the Americans. It creates more optionality. We can actually grow our production because now we have new export points.

Right now, we are so constrained that our gas is trading at like a dollar Canadian per gigajoule, like a third of the price or a quarter of the price that the Americans get. So, we start to get a fair price for our resources. But at the same time, we have this oil and gas emissions cap, which is like a red-light policy on the supply side. So why would you build an export terminal if you think that the supply side is constrained and will not grow? It’s like you’re going to build a big beautiful empty pipeline. So, we need to get rid of some of the policy pancaking and contradictions that we have right now.

Ben de Wit: I think a longer-term consideration is how Canada is also attracting investment in major infrastructure and nation-building projects that can help grow other sectors as well. And also finding some consensus on ways to make our economy more robust for generations ahead.

Zeeshan Nayani: I’m Zeeshan Nayani, Thematic and Sustainability Investment Research Associate at Scotiabank.

Sectors such as energy, transportation, food production, and building infrastructure have been notoriously difficult to decarbonize. One of the sessions that I was the most excited about was the panel session Decarbonizing and Moving Critical Modern Building Blocks, which highlighted how corporations are moving the needle to address decarbonization challenges in these hard to abate sectors.

The panel featured great leaders from sectors at the center of it all. Francois Belanger, Head of Sustainability at Canadian National Railway Company; Dr. Stuart Lunn, VP Policy & Advocacy at Imperial Oil Limited; Tim Faveri, VP Global Sustainability at Nutrien; and Resha Watkins, VP of Sustainability, North America, at Votorantim Cimentos, Brazil’s largest cement company and the eighth largest in the world.

These amazing panelists showcased their knowledge and innovations in that space. What resonated with me the most was when they highlighted how their companies are interconnected in the overall value and supply chain, such that one innovation has the ability to move multiple industries towards a decarbonized future.

Tim Faveri: And all the work that Imperial does to decarbonize your products filter through to a company like Nutrien. If we burn your lower-carbon natural gas, the carbon intensity of our nitrogen is lower, and then we can pass that on to downstream actors that, the food companies, CPG companies that are asking for lower-carbon products to try and influence their Scope 3.

And we can do that scientifically and measure that through our lifecycle assessments. What we feel is the really, really big opportunity is then incentivizing farmers to adopt these kinds of practices or use these products. And most important thing around, around working with farmers is making sure that they are incentivized to change this practice.

There’s only two ways farmers make money, improve their yield and get a better price for more of their crop or reduce their input cost. So, an incentive for them to change practice is really important. And actually, it’s in, in the biodiesel market that we’re seeing in the United States, particularly in the corn belt, where biodiesel manufacturers are providing the largest incentives to, say, corn growers, canola growers for those products, for that lower-carbon-intensity fuel. And that’s really exciting to farmers.

They’re all very interested in that. Because we work on field with farmers through our agronomists and our crop input providers, we can measure the application of practices and lower carbon fertilizers that produces a lower carbon intense canola, or corn, which goes into your facility, and then we all hopefully get a higher price for that, right? And we are also providing a great benefit from lower greenhouse gases.

Francois Belanger: And just building from that, so Tim, you were saying before that food is in the middle of everything. Well, I like to think rail is in the middle of everything.

So, when we think about biofuels, I mean we do ship some of the potash that will go to the farmers. And then we do ship some of those feed stocks that goes to the refineries, and then we ship the product out of the refineries. So, we see the whole picture about what’s happening with renewable fuels, and we see that as a growth opportunity for us from a from business perspective, which is quite fun and very exciting about the opening there, Strathcona.

On the consumer side, as I was saying before, like this is our key lever for 2030 in the next few years, and we see that as an opportunity to reduce our emissions right now without any significant change to our locomotive to up to a certain blend. And so, we’re already increasing our blends.

And in 2024 we were approximately at 10% content for our locomotive fuel from renewable fuel, so a mix of biodiesel and renewable diesel. So that helps reduce our emission right away. And then by doing that we help reduce our customers’ Scope 3 transportation emissions directly.

Patrycja Drainville: Hi, I’m Patrycja Drainville, Director of Sustainable Finance at Scotiabank.

In light of the political and media cycle surrounding ESG investing, it is more important than ever to hear from the investor community. Ultimately, market-driven solutions only work if there’s sustainable demand. And after all, investors were the ones who put ESG on the map by making it a more prominent feature in investment strategies.

That’s why I was most excited to hear from the participants on the panel Investor Perspectives on the Evolution of Sustainable Investing. Scotiabankers Cambyse Parsi and Francisco Suarez moderated a dynamic discussion featuring Patrick O’Connell, Director of Responsible Investing Portfolio Solutions and Research at AllianceBernstein; Heather Sharp Lead ESG Research and Senior Analyst at Jarislowsky, Fraser Limited; Marina Severinovsky, Head of Sustainability North America for Schroeders; Daniel Yungblut, Vice President and Head of Research at Scotia Global Asset Management; and Barbara Zvan, President and CEO of the University Pension Plan Ontario.

The investors on the panel agreed that a pragmatic approach is needed for ESG, but that managing sustainability risks and opportunities is essential for achieving long-term risk-adjusted returns.

Both Barbara and Patrick spoke about the importance of clarity, financial materiality, and evidence-based decision making, rather than simplistic exclusions or quotas when considering sustainability in investments.

Barbara Zvan: So, our approach, it’s rooted in financial materiality and that is because, you know, by law pension plans have to be managed in the best interest of their members.

And that’s typically, and sometimes even explicitly, financial best interest of members. And thus, we always have looked at this from the lens of financial materiality. So, it’s much more of the process; it is not the product. And really what we’re looking at it is from the fact that we have a very long-term horizon, right?

I typically have people that come in early twenties to late twenties for staff, faculty are a little bit older, and I have them for a really long time, right? I’m still paying their pension checks when they’re 90. So, these are risks that manifest over that time horizon.

Patrick O’Connell: I think clarity is something that we’ve had to be a lot better at over the last couple of years. If in the past you got away with kind of confusing words – sustainable, ESG, integrations, impact – I think what we have to do now is be very prescriptive and very clear of what we’re doing.

We are a large asset manager, manage about $800 billion of assets. Kinda the same kind of categories, the bulk of it being in integration, with a lot of clients also on the sustainable or impact side. But I think integration is what we really need to be talking about today.

And just being very clear of what do we mean by integration? What do we not mean by integration? And it’s all about financial materiality. How do we boost long-term results? And I’d bucket in kind of section two is the why, the materiality of back testing, showing that these are themes that are not about altruistic concepts.

This is something that we think helps you survive alpha from a bondholder or a stockholder point of view. And just being really firm on that. And that’s, I think, a message that resonates.

Patrycja Drainville: Ultimately the biggest conclusion is that ESG has to deliver improved financial outcomes for investors. Institutional asset manager Jarislowsky, Fraser had been integrating ESG into their bottom-up process before it was even called ESG. When questioned about third-party empirical evidence that was supporting their approach around ESG investing, Heather Sharp raised the recent meta study out of NYU.

Heather Sharpe: I’ll just talk about a big NYU meta study, just looking at thousands of studies, including other meta studies. Performance period of 2015 to 2020. Obviously, one or two things has happened in the world since 2020, but nonetheless, what the meta study concluded was that ESG had a notable positive correlation with corporate financial performance.

So, things like return on equity, return on assets, actual stock price, that this increased over the long term, and that they also had less volatility in down markets. But if we’re looking at, again, that kind of fundamental bottom-up perspective of looking for, we think that integration of those financially material ESG factors will lead to better companies over the long term. And then from those better companies, you can build a better portfolio for better long-term risk-adjusted returns.

Patrycja Drainville: This really underscores that alpha is being generated not from exclusions, but from integration of ESG principles from the bottom up.

I think this is a big takeaway for all investors. Marina Severinovsky at Schroders, a firm that conducts a tremendous volume of proprietary research around sustainability, reminded us that both financial performance and impact can come from companies in transition.

Marina Severinovsky: So, when we look at climate, for example, we have kind of three categories: climate improvers, and then also kind of the low carbon companies, already low carbon, and then climate solutions.

And actually, what we find is it’s the improvers category – it’s that kind of transition or action category – which is the biggest and most diverse category across sort of industries and sectors that has had the financial outperformance. But it also has contributed the greatest kind of real-world emissions reduction versus the other categories because the solutions companies and the low carbon companies are already pretty low carbon, right?

So, if you want bank for buck, like better improvement, that’s where you go, is that sort of action transition piece.

On engagement, adding value, we have published analysis on, you know, the companies we engage with are more likely to see their emissions intensity reduce, and they’ve had higher returns.

It’s not causation, but it’s certainly very high correlation. We’ve also seen very high correlation of engagement and proxy voting around governance, correlated with sort of sustained, improved company performance.

So again, as a tool of what we can do as investors, I think that active ownership piece is really critical.

Patrick Bryden: Incredible insights across the board. It was a real challenge to put this together. There were so many great moments over the two days we spent together in Toronto.

I’d really like to thank my colleagues Melissa Menzies, Cambyse Parsi, Daniel Gracian, Benjamin de Wit, Zeeshan Nayani, and Patrycja Drainville for their contributions to this episode, and of course to all our panelists and participants at the seventh Annual Scotiabank Sustainability Summit.

We would absolutely love to see you at the summit in 2026. If you would like to help shape the future of sustainability and be a part of the conversation, please be sure to reach out to us for more details.

Thanks for listening. 

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