An interview with Maxime Brochu, winner of the 2017 FSI-PRI Scholarship

Maxime Brochu, winner of the 2017 FSI-PRI Scholarship for the Best Research in Responsible Investment, received his master’s degree in finance from the Université de Sherbrooke. Today, he is a Performance Analyst on the product development team at Desjardins Investments.

His winning research paper focused on evaluating the impact of reputation (defined with ESG factors) on share price performance and on company risk for US listed companies (Vertueux vs. opportuniste, Analyse de l’effet réputation sur la performance des entreprises américaines, abridged version)

Maxime kindly agreed to share some thoughts on his experience with us in an interview.

We are in the last few weeks of soliciting submissions for our 2018 FSI-PRI Scholarship. The deadline is June 30th. 

Find out about the application process

You were the winner of the 2017 FSI-PRI Scholarship for Best Research in Responsible Investment. Tell us about your interest in the topic.
My interest in responsible investment is long standing. I’ve always had a human-centric focus of the economy and I viewed finance as an important driver of development. So, I actively sought ways to progressively integrate the concept of responsible investing – that is, incorporating environmental, social and governance criteria – into my university studies and my professional development.

When I did my bachelor  studies, there weren’t any courses in responsible investment. It was through personal interest reading and attending conferences that I learnt about the subject. Further to that, I selected courses that included a social focus, related to cooperative development. I think that we will shortly be seeing more and more material on responsible investment. Students in bachelor’s degree programs will also be learning about the subject. It won’t be solely for those pursuing master’s degrees.

What made you decide to enter the FSI-PRI Scholarship competition and to pursue your area of research?
As to my area of study in this research, I deserve no special credit. Responsible investment was calling me, but I didn’t know which avenue to explore. When you finish your bachelor’s degree and are choosing a topic for your master’s, you’re never really aware of the available scientific literature. It was my research director, Frank Coggins, at the Université de Sherbrooke, who offered some suggestions. And I chose my subject because, while understanding the “corporate responsibility” element, I had wanted to have a purely financial perspective of responsible investment.

I heard about the competition thanks to the 2015 prize winner, Édith Breault, who also studied at the Université de Sherbrooke. I knew that she had won the FSI-PRI Scholarship and I chatted with her about various subjects. Even though, as research assistants we weren’t at the same level, I collaborated on a database that was used for her dissertation.

Your efforts were rewarded because your work has contributed to the advancement of research and knowledge of ESG factors for financial sector practitioners. What are some highlights?
A significant portion of the scientific literature on finance questions revolves around financial returns and events that affect it. For my dissertation, this was the same. I asked myself this question: “Does reputation or ESG criteria affect financial returns?” I used a database that allowed me to evaluate 3,000 American companies operating between 2004 and 2014. Under the approach proposed in my research, reputation is a stand-alone risk. As a result, companies with a bad reputation, which I affectionately refer to as “the opportunists”, are at greater risk than the companies nicknamed “the virtuous”, who enjoy a good reputation. Based on this observation, I simply added risk factors relating to reputation to the traditional financial risk factors.

I assessed whether my model for the evaluation of financial assets turned out to be better than others; whether it better explained the financial return of the companies. I must admit that my results surprised me. My model, which included the reputation factor, performed better than the others reviewed. Reputation on its own isn’t truly the strongest factor, but it is complementary, adding additional information to evaluation models. The element of complementarity stands out. Much data is not captured by traditional financial models.  Including a reputation factor, we obtain a better performing, more correct model. This means that investors who don’t consider company reputation in their evaluations may be lending themselves to a risk valued by the market.

In addition, my study is relevant to certain types of investors who are interested in the attributes of reputable companies, “the virtuous”, such as greater stability over time and consideration of social impacts. It’s the market that guides the risk linked to reputation. My study does not provide 100% confirmation that reputation is a true risk factor, but it certainly opens the door for more research.

In your opinion, what opportunities exist for future research in this field?
There are many. It would be interesting to push my research further, for example, by adding another database or even another region. Currently, a University de Sherbrooke student is working to refine my financial model. And if I could choose another research subject, I would lean toward impact investment. This subject is rarely handled because of its complexity—related to a lack of data and a lack of history, among other challenges. Impact investment is an investment approach that aims to generate as much financial returns as social and environmental returns. In my opinion, an integration into fairly simple fund portfolios would be quite possible. So, this would be worth considering in the near future. New databases will emerge, and it would be interesting to further study this subject. Impact investment is almost like the responsible investment of the future.

What would you recommend to students or researchers in this field?
As I’ve already mentioned, it would be interesting to pursue research on impact investment and to continue to commit to responsible investment, even if there are pitfalls and difficulties along the way. This field puts a human face on finance. It is forward-looking and will allow researchers and students to stand out from the crowd.

What has been the significance or impact of winning the FSI-PRI Scholarship?
In Quebec, the world of responsible investment is small. We often bump into the same people at events. The presentation of my research results, both at the FSI-PRI Scholarship Awards cocktail and at the Quebec PRI Network Symposium on Responsible Investment, brought me a great deal of exposure among these people. I was also able to grow my network of contacts — between students who came to ask me questions and other professionals. The news was announced at Desjardins, my current employer. Many of my colleagues became interested in the FSI-PRI Scholarship and in my research.

Was winning the FSI-PRI Scholarship a catalyst in your job search?
I has already accepted a position with Desjardins when the scholarship was awarded. However, speaking in front of 200 people contributed to my personal growth and drew attention to my dissertation. This was much appreciated.


Thank you for the interview, Maxime.


Maxime being interviewed at the 4th edition of the Colloque québécois de l’investissement responsable du Réseau PRI Québec