Canadian Equity Research

ESG Investing Canadian Equity Research Canadian Equity Research 22 July 2020 Canadian Equity Research | Canaccord Genuity Corp. (Canada) | [email protected] Derek Dley | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7270 An ESG Investing Roadmap Inside Sector/Industry Page Navigating a new normal Airlines and Aerospace 2 The last five months have been unprecedented within the global capital markets, with Cannabis 3 historic volatility, a laser focus on the “COVID-19 economy” and myriad projections on Consumer Products 4 how the world will look coming out of the pandemic. Many companies have been forced Energy 5 to rapidly adapt their business models to adjust to changing demand environments and Financials 6 new physical distancing requirements, and these changes have become the focus for many investors over the last few months. That said, prior to the COVID-19 pandemic, Health, Wellness and Lifestyle 7 one of the most powerful trends within both Canadian and global capital markets was an Industrials 8 increased focus on Environmental, Social, and Governance (ESG) practices. We believe Metals and Mining 9 this trend is poised to accelerate. Real Estate 10 Numerous studies have demonstrated how firms that score highly on an ESG framework Telecommunications 11 tend to provide stronger shareholder returns over the long term. This, in our view, is Technology 12 reflective of the long-term view employed by many leaders in the ESG space, and the ability of these leaders to identify both longer-term potential risks and opportunities for growth and efficiencies. The COVID-19 pandemic has provided a concrete example of why companies and investors have become more focused on longer-term risk mitigation, and on a company’s ability to pivot its growth strategy based on a rapidly changing environment. Leaders within the ESG space today have exhibited a shift from “reactive” to “proactive” ESG strategy implementation, and we expect the adoption of more formalized ESG practices to accelerate over the next decade. Identifying key ESG themes on a sector-specific basis Our Canadian Equity Research team has identified the ESG trends we believe are the most impactful for each individual market sector. Our goal is to provide investors with a framework of which ESG themes, metrics, and disclosure methods are most relevant within each sector. Our analysis has identified several common threads, with the “E” tending to be the most relevant topic of discussion. Carbon reduction remains a key universal trend, as do strong corporate governance practices. However, within each sector, there are unique themes and metrics that are of increasing focus for both investors and individual companies. This report identifies key ESG themes along with our views on the best ways to consistently track or “score” an individual company’s ESG performance. We recognize that, in many cases, tracking ESG performance is much more of a qualitative exercise than a quantitative one. However, we are confident that evaluating ESG performance has become, and will continue to be, a greater point of focus for much of the investing public. We have also identified a select group of companies in each sector which we believe are leaders on the ESG front, and that given the growth of ESG-focused investors are likely to attract incremental capital over the near and long term. We hope this report provides some useful perspectives for your investment decisions, and we welcome any feedback. Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX) The recommendations and opinions expressed in this research report accurately reflect the research analyst’s personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. For important information, please see the Important Disclosures beginning on page 13 of this document.