Incorporating your personal values into your investment decisions
As a consumer, you may not wish to purchase a pair of shoes made by child labour or a weed killer that may contain potential toxins. That same sentiment can apply to your investments.
Socially responsible investing (SRI) is a growing trend. According to Canada’s Social Investment Organization, there is more than $609 billion in SRI assets in Canada, including retail and institutional investments.
What qualifies as SRI?
Socially responsible investing is the use of social, environmental, and governance considerations in the selection of companies in which to invest.
Core strategies for SRI focus on positive and negative screening — choosing companies that make positive contributions to society or the environment and excluding companies whose products or practices have a negative social or environmental impact. Assessing a company’s performance is commonly based on these areas:
- Product safety and quality;
- Human rights record, labour relations, and respect for workforce diversity;
- Corporate governance and codes of conduct;
- Community involvement and charitable contributions; and
- Environmental practices and reporting.
Investment performance
Academic studies in Canada and worldwide have compared the performance of socially responsible investments with conventional investments. Usually the findings show little or no difference over the long term, a result verified by comparing indices.
For example, the Jantzi Social Index is modelled on the S&P/TSX 60, but selects 60 Canadian companies according to environmental, social, and governance criteria. Since its inception on January 1, 2000, through March 31, 2011, the Jantzi Social Index has an annualized return of 6.78%, while the S&P/TSX 60 returned 6.67%.
Where to invest
In 1986, there was one SRI fund in all of Canada. Today, investors who wish to include socially responsible investments in their portfolios can select from 94 retail mutual funds and retail venture funds, a variety of segregated funds, and an exchange-traded fund. SRI funds cover all major asset classes and include balanced funds, global or international equity funds, and an index fund.
Of course, you can also invest in individual stocks. Many public companies publish an annual Corporate Social Responsibility Report, which you can use to assess their environmental and social performance.