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Recently, I attended a seminar on Socially Responsible Investing (SRI), by Eugene Ellman Executive Director of the Social Investment Organization (SIO). I was struck by the never-ending choices and decisions facing consumers with respect to their investment options. Don't get me wrong, choice is good. But in an area where most investors feel out of their depth, more choice can be overwhelming and even paralyzing. Here are some highlights for you to consider.
With the ever increasing impact of climate change, political unrest, movements like Occupy Wall Street, country debt defaults, and environmental issues, many Canadians are making more considered daily choices about the products they buy, the way they live, and the companies they support. The question is why not extend that thinking to your investments?
Socially Responsible Investments (SRI) are defined as: the integration of Environmental, Social, and Governance (ESG) considerations into the management and selection of investments. SRI investors have a desire to align their values with their investments and to influence positive social and environmental change.
3 common criteria of SRI are:
- Positive & Negative Screening
Screening to exclude investing in companies involved in undesirable activities and to include companies demonstrating leadership in environmental, social, and governance issues (ESG). Negative screens could exclude companies involved in weapons contracting, pornography, and nuclear power. Positive screens could include companies with good track records in employee relations, international labour standards, gender & cultural equality policies.
Shareholders use their power to influence companies' behaviour through dialogue with company management, filing shareholder resolutions, and participating in companies' annual meetings.
- Impact Investing (or Community Development Investments)
Impact Investing is about local communities mobilizing local capital to create projects and jobs within the community.
Not all investors or fund companies use the same SRI criteria for selecting companies to invest in so make sure you are aware of, and aligned with, the criteria used to select the funds you are considering. There are several Canadian SRI Mutual funds and only one Canadian SRI exchange-traded fund, the iShares Jantzi Social Index Fund (stock symbol: XEN)i . The US has more SRI offerings than Canada.
Socially Responsible Investing Returns
Often the biggest consumer concern with SRI investing is whether it will it negatively impact their returns. According to the Social Investment Organization (SIO), the national membership-based organization for SRI in Canada, SRI returns based on the Jantzi Social Index (Canada) were identical to the S&P/TSX 60 returns over a 10 year period when comparedii as of December 2011. The Jantzi Social Index (Canada), launched Jan.1st, 2000, is the most commonly used benchmark index for SRI in Canada and holds 60 companies as does the S&P/TSX 60.
As of June 2010, there were $531 billion of assets in SRI, representing approximately 20% of all assets under management in Canadaiii. Interestingly, 85% of the $531 billion is managed by pension fundsiv which have proven to be early adopters of this category and are managing their holdings in a way that incorporates ESG issues.
If this article resonates with you, be sure to let your Investment Advisor know. Ask about your options in this sector, how different fund companies use SRI criteria, and explore the impact (if any) of allocating a portion of your investments to SRI.
Some investment firms already include questions about SRI in their Know Your Client form. If your advisor isn't too keen on this sector, be sure that they explain their reasons. SRI may be one way for you to invest in a more positive future!
For more information:
www.socialinvestment.ca
www.sustainalytics.com/indexes
www.srimonitor.blogspot.ca
www.meritas.ca
www.ethicalfunds.com
i Source: www.corporateknights.com/article/are-sustainable-etfs-ready-prime-time? ii Source: http://www.sustainalytics.com/jantzi-social-index-december-2011-returns iii SIO - Advocis presentation, Socially Responsible Investing & your clients, March 8, 2012 iv SIO - Advocis presentation, Socially Responsible Investing & your clients, March 8, 2012 Renée is a Certified Financial Planner specializing in high income earners facing financial transitions and retirement planning. | 
