ESG ETF: ‘Companies weren’t as aware of all the need to do the detailed work,’ expert says

Emerge Canada Inc. CEO and President Lisa Lake Langley details her diversity initiatives and discusses industry standards that she hopes to see improved upon.

Video Transcript

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SEANA SMITH: Inflows into us sustainable funds hitting the lowest level in seven years last year in 2022 amid growing backlash against ESG investing. This is according to a report from Morningstar. But despite that dip, plenty of investors are still buying them. So let's talk about it.

What exactly are they? ESG is standing for environmental, social, and governance. And it's a criteria used to evaluate a company's sustainability efforts. Now, one way to invest in ESG is through an ESG ETF, or an exchange-traded fund, made up of a basket of these types of companies that are prioritizing sustainable causes.

Now these funds cater to investors who want to put their money towards issues that are important to them. Investments typically include in these areas for the portfolio are efforts that they prioritize in climate change and carbon emissions, energy efficiency, gender and diversity, and also human rights. So for more on this space and the investment opportunity there, we want to bring in Lisa Lake Langley, Emerge Capital Management CEO and founder as part of this week's ETF report brought to you by Invesco QQQ.

So Lisa, break all this down for us. You have five ESG ETFs that trade here in the US. And I believe they are all managed by female fund managers. So talk to us just about your strategy and why you chose to go with female fund managers, why that's a priority.

LISA LAKE LANGLEY: Diversity is a key tenant at Emerge. I'm a majority woman fund company owner. We launched on September 8 and 9 five ETFs in the us and five in Canada, the exact same strategy, so that we would make more of a bang. Because we wanted to send a very important message to the industry. There is no other program anywhere in the world that just features women portfolio managers. And I've had calls asking me if this is legal.

I've had advisors asking me, you know, shouldn't we just be focusing on performance? Why are we focusing on gender? And there's such an industry problem that we have to educate about it a little bit. And they deserve an opportunity.

Only 5% of assets in north America are really being managed by women. Less than 11% are actually women portfolio managers. And all of this is based on self-reported stats. There is no regulatory compulsory reporting. And that's where the issue lives, right?

How do we know that women earn 83% on the dollar, you know, for male-- men in similar positions? Because that information is reported. But in the investment industry, you're just a innocuous investment professional. So--

- But don't you have a fiduciary duty not to concentrate on gender, but on returns?

LISA LAKE LANGLEY: I have a fiduciary duty to do what's in the best interest of our unit holders and to identify extremely experienced portfolio managers. And all of these women have over 20 and 25 years of experience. They've managed assets actively in all kinds of climates. They may be new to the ETF space, but these these are not, you know, newbies for portfolio management. All are very senior, have Morningstar publicly available information. Anyone can find it.

SEANA SMITH: And Lisa, when it comes to ESG investments, really overall, there certainly has been some backlash as that topic has been debated just exactly what companies are using the criteria, whether or not those investments, specific investments should qualify. Are you confident that we are on a road kind of to rebuilding that trust and that investment interest in ESG is only going to grow from here?

LISA LAKE LANGLEY: I think the rebuilding of the trust and establishing regulation and getting more scrutiny is an extremely part of anything that's newer, right? What we have had in this greenwashing issue is that companies weren't as aware of all the need to do the detailed work. Every one of our stocks is reviewed and approved. We've hired very talented portfolio managers who are suggesting stocks. And then they're going through a separate team that is also looking at the sustainability features.

And we have a practical approach, right? Like, we wouldn't have planes in the sky if we didn't have fossil fuels. But we look for responsible refiners. And what's really important to us is looking for gender and diversity, making sure that companies have good social practices. They're good constituents of their employees and their clients and their communities.

- What are some of these funds and what sets them apart?

LISA LAKE LANGLEY: What sets them apart is they're all actively managed--

- If you could name some of them now--

LISA LAKE LANGLEY: OK, perfect. So one of them is called EMPWR Unified Global Equity. And that buys the individual holdings of each of the underlying four. The underlying four are-- Catherine Avery is running sustainable large cap dividends. She calls them "dividends with a purpose." Cate Faddis is running our select equity growth. And then we have Josephine Jimenez with emerging markets. And Jane Li at Zevin is managing our global core. Everyone is off to a very strong start, even though we launched in September, which was kind of like the brave of the bravest, you know, head out.

SEANA SMITH: Certainly, and still is at this point with all that uncertainty out there in the markets. Lisa Lake Langley, great to have you. Thanks so much for joining us here, Emerge Canada CEO and president.