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Socially responsible investing –
is it right for you?
When investing your savings, meeting your financial goals is clearly important, but to many,
meeting them in a socially responsible way is just as important.
What is socially responsible investing?
“Socially responsible investing... includes all the financial decision-making processes that are
a part of a prudent investment management approach, but it also includes the selection and
management of investments based on issues of sustainability or social responsibility,” says
the Canadian Social Investment Organization (SIO), a network of firms in the financial industry
committed to socially responsible investing (SRI).
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June 2012
In the broadest sense, SRI considers an additional level of
analysis to include environmental, social and/or corporate
governance factors, on top of typical financial analysis.
A wide range of approaches to
choose from
In practice, SRI encompasses a wide range of approaches to
investing your savings. There are three main categories:
1. positive and negative screening of environmental, social
and governance (ESG) factors – for example, companies
invested in nuclear, gambling or tobacco operations may
be excluded, or companies with best-in-sector human
rights, environmental policies or employee relations may
be included in the portfolio
Does taking an SRI approach mean
you have to sacrifice returns?
Many investors assume that they have to sacrifice returns,
but this is not necessarily the case. In fact, a recent research
report by the SIO found that the Canadian SRI funds are,
as a whole, performing strongly with outperforming funds
in every category.
Compounded returns
1 year
3 year
5 year
-9.46%
12.83%
-0.49%
5.73%
-10.70%
12.48%
-1.03%
4.37%
-1.72%
9.27%
0.31%
4.09%
-3.16%
11.38%
0.90%
3.87%
Average SRI Global Equity
-0.56%
8.74%
-4.70%
-0.94%
Average Global Equity
-0.68%
10.09%
-4.51%
-1.07%
Canadian Equity
Average SRI Canadian
Equity
Average Canadian Equity
2. community investment – investment of money into
community development or micro-enterprise initiatives
that contribute to the growth and viability of
communities, particularly vulnerable communities
Canadian Equity Balanced
3. shareholder advocacy – this is the process of using
shareholder influence to help bring about positive social
and/or environmental change at corporations
Global Equity
Increasing interest globally
While SRI assets is considered by some to be a niche
investment, it is more mainstream in Europe where total
SRI assets under management reached €5 trillion (or 19.1%
of the total market) at the end of 2009 and in the United
States where professionally managed assets following SRI
strategies at the start of 2010 amounted to U.S. $3.1 trillion
(or 1 in every 8 dollars).*
A significant portion of these assets are held with
institutional investors, such as pension plans –
approximately 97% of Canadian SRI investments, 73% of
the total in the U.S. and 92% of the total in Europe.* One
reason for this is growing regulatory pressure on investment
companies in some countries, such as the UK, to invest
in a socially responsible manner. But another potential
motivation for this shift is that institutional investors are
interested in the long-term cash flows of their investments
and are aware of the potential impacts ESG risks could have
on long-term returns.
10 year
Average SRI Candian
Equity Balanced
Average Canadian Equity
Balanced
*Socially Responsible Investment Funds Perform Strongly Research Brief. Ian Bragg,
Associate Director, Policy and Institutional Services, Social Investment
Organization, May 2012.
There is some academic debate around what has caused this
outperformance, whether it’s due to the ESG screens that
have been used or other investment factors – but it is clear
that adopting an SRI approach does not mean having to
compromise returns.
As with any approach to investing, it is important
to choose the SRI fund that best meets your
individual needs. Contact your financial advisor
to determine the fund that is right for you.
*Sources: Canadian Socially Responsible Investment Review 2010: A comprehensive survey of socially responsible investment in Canada, May 2011;
Social Investment Forum Foundation; “2010 Report on Socially Responsible Investing Trends in the United States” and Eurosif; “European Study 2010”
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FUND534 06-12-E
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read
the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be
repeated. The information contained in this article is designed to provide you with general information related to investment alternatives
and strategies and is not intended to be comprehensive investment advice applicable to the circumstances of the individual. We strongly
recommend that you consult with a financial advisor prior to making any investment decisions.
June 2012