According to the 2015 Canadian Responsible Assets Trends report, responsible investments have increased from $600 billion to over $1 trillion in only two years (2013 – 2015)!
What is Responsible Investing?
Investment managers look at various environmental, social and governance factors for each company under consideration and then identify those that are “rising above the rest” in their peer group.
The four different responsible investment strategies that investment managers utilize include:
- ESG Analysis
- Corporate Engagement and Shareholder Action
- Negative Screening
- Impact Investing
This could be a policy or business practice they might utilize or the actual product that they are making or selling. This is known as ESG integration or sometimes called “best of class” strategy. Examples of these factors include tracking greenhouse gas emissions, diversity on boards, utilizing green energy and sustainable supply chains.
Corporate Engagement and Shareholder Action
Corporate engagement and shareholder action involve using a shareholder’s influence to change the behaviour of specific companies that the investment managers have selected for a portfolio. This happens through discussions with the company’s management or through a resolution at the company’s annual general meeting. The top three engagement issues in 2013 were:
- executive compensation
- human rights issues
- greenhouse gas emissions
This is a values-based strategy where an investment manager excludes certain sectors because of certain types of products or services, for example, include tobacco, alcohol, gambling, or military weapons.
A growing trend I’m seeing with our younger members is an interest in excluding mining, oil, and gas. This can be quite difficult to do in the Canadian marketplace, since over 80% of the Canadian stock exchange is made up of these three sectors. Solutions might include investing in individual environmentally-friendly stocks through an online trading account. Risks would be much higher with this strategy, but it would still allow the member to stay within acceptable sectors.
Impact investing is an investment approach that intentionally seeks to create both financial return and positive social or environmental impact. Assiniboine Credit Union has an active community investment team that looks for opportunities in this area, which includes investing in Peg City Co-op, Pollock’s Hardware Co-op or Neechi Foods.
- $1 trillion in responsible assets under management
- 68% increase in assets over 2 years
- Pension fund assets which use responsible investment strategies (ESG analysis and corporate engagement) are up 70% in 2 years
- Canadian impact investing assets now at $ 4.13 billion
- Retail assets are $61.9 billion
- Retail RI mutual funds have increased 52.3% from $4.36 billion to $6.64 billion
Source: RIA Trends Report
Want to integrate environmental, social and governance criteria in your own investment portfolio? Contact Cheryl Crowe, Senior Financial Advisor, SRI Investments. Cheryl is a former President and Chair of the Board of the Responsible Investment Association and has over 20 years’ experience working with responsible investment. She would be happy to help you integrate your personal social and environmental values into your investment decisions.
Senior Financial Advisor, SRI Investments
Assiniboine Credit Union