Stock Selection Methods

ESG Services team at NEI Investments

Our partner, NEI Investments, has been Canada’s SRI leader for over 25 years. Its ESG team is dedicated to one of the industry’s most comprehensive responsible investing programs.

The ESG Services team is responsible for analyzing the environmental, social, and governance (ESG) performance of all companies in the Ethical Funds family of mutual funds, some of which are part of the SocieTerra portfolios. Its analysts and corporate engagement specialists possess a range of skills as well as backgrounds in economics, business, finance, environmental studies, natural sciences, and history.

The team pioneered the development of evaluation and Corporate Engagement methodologies in Canada and has some ten years of experience implementing them. With 11 members, this multidisciplinary group is the largest of its type in Canada.


ESG evaluations methodology

Company ESG practices are analyzed using the ESG evaluations methodology developed for each industry. This tool looks at between 50 and 120 different ESG indicators. Each company is rated and ranked against its peers, receiving an overall score that determines whether or not it is a candidate for Ethical Funds investment.

How companies are graded on the ESG evaluations methodology

A - Leaders
Cutting-edge policies and exemplary performance across all areas

B - Fast Followers
Working diligently to ensure compliance in most performance areas

C - Adopters
Tends to adopt progressive practices only when they become accepted as industry norms

D - Responders
Less proactive; adopts progressive practices in specific areas but trails its peers in other areas

E - Non-compliant
Fails to meet our standards/ineligible for investment

NEI Investments management firmly believes that companies that integrate ESG into their strategic plans are most likely to create long-term value for investors. As of February 28, 2010, the Canadian Ethical Index - which includes all companies that meet the NEI Investments' ESG criteria-has outperformed the TSX Composite Index for one-, two-, and three-year returns.