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Tim Prescott of NEI asks: Investing for our world or investing for returns – why not both?

POLITICAL FRAGMENTATION is deepening worldwide, with volatility likely to escalate over the course of 2025 and beyond. In this shifting landscape, responsible investing (RI) is more crucial than ever, requiring adaptability to navigate ongoing changes. Over the coming decades, multiple political cycles will introduce both opportunities and challenges. However, the key takeaway for the sector remains clear: given the long-term nature of RI activities, they must be structured to thrive in any political environment. Tim Prescott, senior vice president, head of asset management at NEI Investments, sees beyond the short-term noise and focuses on what really matters. “The question isn’t whether responsible investing is good or bad – that ship sailed long ago,” Prescott explains. “The real challenge is separating short-term political rhetoric from long-term business fundamentals.”

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“RI is now at a crossroads. It remains a widely accepted strategy among asset managers, but it’s now caught between bold, often needlessly politicized headlines and the need to justify the business case for its foundational values”

Tim Prescott, NEI Investments

Responsible investing is a framework for understanding how companies create value in a rapidly changing world. The key question is how asset managers and investors can recognize and capitalize on long-term, sustainable value. Prescott describes the current state of responsible investing, pointing out: “RI is now at a crossroads. It remains a widely accepted strategy among asset managers, but it’s now caught between bold, often needlessly politicized headlines and the need to justify the business case for its foundational values. “Companies are still developing sustainability plans. They’re still improving governance and diversity. Whether the headlines want to focus on it or not, these things are already happening,” says Prescott. “It’s not about grandstanding – it’s about recognizing business resilience and opportunity.”

“This first-to-market fund integrates socio-economic trends and emphasizes corporate culture to identify untapped opportunities,” Prescott says. “To get this level of understanding requires investigation well beyond financial statements. We look at how a company operates, how it manages change, and how its culture drives performance.” This isn’t about passive investing. It’s about making tangible calls and creating a system for action-oriented outcomes that balance principles and performance. Prescott details how NEI seeks to bridge the gap between intangible values and concrete results, drawing on examples like its Environmental Leaders Fund to illustrate the incremental progress that delivers meaningful returns. “We’ve transitioned from being overly weighted on values to finding a natural middle ground, where action doesn’t detract from the outcome but strengthens it,” he says. Recent corporate failures have underscored the financial impact of poor governance. Billion-dollar regulatory fines, environmental mismanagement, and reputational damage aren’t abstract risks – they have real financial consequences. “Strong governance isn’t an ‘ESG issue,’ ” Prescott adds. “It’s a financial imperative. Companies that ignore governance risk falling behind, and investors who ignore governance risk missing major red flags.”

uncovering unseen opportunities – those fundamental, often-overlooked elements that drive long-term performance. “It doesn’t have to be perfect to be valuable,” says Prescott. “People expect ESG to be an all-or-nothing approach, but that’s not how business works. It’s about making small, meaningful changes that build over time.” Prescott elaborates that while incremental change might seem small, over time it leads to significant transformation. By focusing on systems thinking, where inefficiencies in markets are turned into opportunities, NEI’s team make models progressively better. “However, firms must leave room for bold innovation and creativity,” Prescott says. “While incremental progress builds the foundation, moments of nimbleness and agility help recognize unseen opportunities.”

Responsible investing isn’t a niche concept anymore. Much like technology, which was once a distinct sector but is now embedded in every aspect of business, RI is becoming a fundamental part of investment analysis. Just a few years ago, the term “responsible AI” barely existed. Today, it’s a central focus for tech firms, regulators, and investors alike. “Our job is to uncover the best opportunities in this space before the market catches up,” Prescott emphasizes. “This isn’t about choosing between performance and purpose. It’s about recognizing that the two are inextricably linked. Responsible investing isn’t an ‘either-or’ proposition – it’s a ‘both-and’ opportunity.”

Another key differentiator in NEI’s strategy is its ability to leverage global expertise. The firm doesn’t rely solely on its own internal analysis; it taps into a network of global sub-advisors, gaining insights from a range of perspectives. This collaborative approach allows NEI to identify best practices from asset managers across different markets and industries. By learning from a diverse set of players, the firm continuously refines its investment models, ensuring that it stays ahead of emerging trends rather than simply reacting to them. “We get to see the best and worst of global asset managers,” Prescott explains. “We learn from their successes and their failures. That’s an advantage few firms have.”

Concept of step-by-step achievement of goals.

RI as a business imperative, not a checkbox

Looking ahead: the future of RI

Published March 24, 2025

“This isn’t about choosing between performance and purpose. It’s about recognizing that the two are inextricably linked. Responsible investing isn’t an ‘either-or’ proposition – it’s a ‘both-and’ opportunity”

Tim Prescott, NEI Investments

Context

Investment opportunity

Ageing populations in developed countries

Projected spend by seniors is expected to grow from $8.7T in 2020 to $15T by 2030

Well-being

Increased incidence of chronic disease

Of the population 50 years of age or older, the number with at least one chronic disease is estimated to increase by 99.5% by 2050

Health innovation

Increased wealth trajectory for the bottom billions

Driven by strong demographics and GDP growth in emerging markets, ~3 billion people will join the ~4.9 billion global middle class by 2030

Access to finance

Transformative technology

3.2 billion people live in areas covered by mobile broadband networks but do not use mobile internet

Equitable connectivity

Urbanization

Half of the global population already live in cities, and by 2050 two-thirds of the world’s people are expected to live in urban areas

Community infrastructure

AI and automation

By 2025, AI and automation will displace ~75 million jobs but will also create ~133 million new jobs necessitating higher skill and education levels

Education and jobs

Individuals >65 years old. Wolfgang Fengler, “The silver economy is coming of age: A look at the growing spending power of seniors,” Brookings, 14 January 2021. Ansah JP, Chiu CT. Projecting the chronic disease burden among the adult population in the United States using a multi-state population model. Front Public Health. 2023 Jan. Barclays Private Bank, See beyond: thematic investing, August 2020. 2022 Mobile Industry Impact Report: Sustainable Development Goals,” GSMA, 2022 September. Hannah Ritchie and Max Roser, “Urbanization,” 2018. Published online at OurWorldInData.org. The Future of Jobs Report 2023, World Economic Forum, April 2023.

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For years, NEI has been integrating RI principles not as a marketing strategy but as a core component of investment analysis. That hasn’t changed. What has changed is the recognition that companies with strong ESG fundamentals are not outliers – they’re becoming the norm. The question is: which companies are executing these strategies in a way that drives long-term success? A key component of NEI’s approach is going beyond surface-level metrics to uncover deeper investment potential. Prescott highlights the firm’s Global Corporate Leaders Fund as an example.

The debate around responsible investing has intensified, with extreme viewpoints emerging on both sides. The new US administration’s agenda, global economic pressures, and shifting public sentiment have turned RI into a battleground. Some see it as essential to future-proofing investments, while others dismiss it as a political distraction. But the reality is more nuanced. Prescott emphasizes that most investors and advisors sit somewhere in the middle. “The bulk of the population is actually taking a pragmatic approach to responsible investing,” he says. “They’re not looking to be swayed by ideological extremes. They just want to make sound investment decisions that account for the world we live in.”

Beyond the extremes: a pragmatic approach to RI

One of the greatest misconceptions about responsible investing is the expectation of perfection. Critics of ESG investing often claim that if a company isn’t perfectly sustainable, it isn’t worth considering. But investing has never been about perfection; it’s about progress. Incremental changes, when applied consistently over time, create lasting value. Whether it’s improving supply chain transparency, increasing board diversity, or reducing carbon footprints, small shifts compound into significant advantages. This is where NEI’s approach stands out. Rather than chasing trends or reacting to headlines, the firm focuses on

The power of incremental progress

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Disclaimers: This material is for informational and educational purposes, and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. The views expressed herein are subject to change without notice as markets change over time. Information herein is believed to be reliable, but NEI does not warrant its completeness or accuracy. Views expressed regarding a particular security, industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Do not place undue reliance on forward-looking information. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus and/or Fund Facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. (“NEI LP”). Northwest & Ethical Investments Inc. is the general partner of NEI LP and a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is the sole limited partner of the Manager. Aviso is a wholly-owned subsidiary of Aviso Wealth LP (“Aviso Wealth LP”), which in turn is owned 50% by Desjardins Financial Holding Inc. (“Desjardins”) and 50% by a limited partnership owned by the five Provincial Credit Union Centrals (the “Centrals”) and The CUMIS Group Limited.

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