Did you know that as a responsible investor, you will enjoy returns comparable to those achievable with conventional investments?
The first question that all investors ask in the following: Is my investment going to be profitable? The question is a legitimate one given that the rationale behind all investments is to grow one’s ￼capital whether one chooses to invest responsibly or not.
In answer to this question, ever increasing numbers of studies have been conducted over the past decade with findings tending to confirm that RI does not diminish returns. In fact, quite the contrary! As underscored by the US-based Forum for Sustainable and Responsible Investment (USSIF), it is increasingly evident that ‘responsible investors do not have to pay more to align their investments with their values, or to avoid companies with reprehensible environmental, social and corporate governance practices².’
Whether produced by international organizations, by academic, public or financial institutions, by RI professionals or by other specialized institutions, studies available on RI product financial performance provide a broad, diverse and interesting range of findings for anyone seeking clarity on the issue. To this end, USSIF proposes a sampling of four salient studies:
Demystifying Responsible Investment Performance. Published in 2007 by the United Nations Environment Program/Financial Initiative (UNEP/FI), this study makes available to the public an analysis based on some thirty studies, 20 by academics and 10 by financial sector professionals.
Then, two years later, a similar number of academic studies published between 1995 and 2009 were analysed in depth by the Mercer consultancy which published a report entitled Shedding Light on Responsible Investment: Approaches, Returns and Impacts.
In 2011, GMI Ratings, a firm specializing in the analysis and evaluation of extra-financial risks, conducted a study dubbed Ten Things to Know about Responsible Investing and Performance .
Lastly, in 2012, Deutsche Bank published Sustainable Investing: Establishing Long Term Value and Performance, which was based on over fifty studies into RI published since the 1990s.
In the light of findings brought to the fore, each of the four studies made it possible to demonstrate that the financial performance of an investment product depends on a large number of factors other than ESG considerations, that RI does not have any real unfavourable impact on product diversification, and most importantly, that there is no negative link between financial performance and inclusion of ESG factors in one’s investment strategies. In other words, IR products ‘perform comparably to conventional products³.’ In short, whatever their nature, all investments are subject to fluctuations which depend more on myriad different factors than on specific RI or non-RI choices.
Lastly, like in Europe and the USA where the share of RI assets under management has increased exponentially since 1995 (+486%)4, increasing numbers of investors in Québec and Canada would appear to be equally convinced of the financial performance of responsible investments. Accordingly, between June 2010 and December 2011 alone, assets managed in compliance with RI criteria grew by 16%, compared with 9% for total assets under management5 (It is interesting to note that the majority of investors having espoused RI to date are institutional investors).
Regarding the financial performance of Canadian funds, readers will note that, since the outset, Jantzi Social Index has posted returns superior to those of S&P/TSX. Indeed, according to quarterly data produced by Fundata and subsequently analysed by the Responsible Investment Association (RIA) in a report entitled Responsible Investment Funds in Canada , the nation’s RI funds in 2014 and in 20156 performed better than the Canadian average in each of the leading investment product categories (mutual funds, funds traded on the stock exchange, and capital development funds). With regard to Canadian and US share-based products, and Canadian fixed income products, RI funds also performed better than the market average over the past one, three, five and ten years.7
Did you know that… money in personal savings accounts is actually used by financial institutions to invest in different companies?
In fact, financial institutions use customer savings to make money. Check out how to ensure that your savings are engaged in responsible investment.
Credit unions across the country offer microfinance and community-investment products, frequently lending to borrowers such as non-profit organizations which may not favourably qualify at other financial institutions. Credit unions also offer a range of impact investment products, the most popular being debt financing (loans) to non-profit organizations and microfinance for individual borrowers, with notable concentration in sectors such as affordable home financing.
If you bank with one or more of the chartered banks in Canada, all of them issue sustainability reports which provide details on how they use your money.
Did you know that… sustainability stock indices exist, that they can help investors identify companies suitable for investment, and that they benchmark portfolio performance against a set of sustainability leaders?
Check out an index or two among the list of social and environmental indices listed in the Ethiquette Resource Centre.
…in various parts of Canada, it is possible to invest in local micro-lending institutions which offer small loans to local entrepreneurs and solid small businesses, thereby supporting local sustainable jobs, as well as economic and social opportunities in your community?
Check out this map to locate the community investment fund nearest you (in the Category selection section, click on Retail Investment Products). By clicking on the fund you seek to know more about, you will find details such as the minimum investment requirements, investment terms and a link to the fundʼs website for further particulars.
2 USSIF, « Performance and SRI »
4 USSIF, « Performance and SRI »
5 Responsible Investment Association (page consulted 5 August 2014). ‘Trends in the matter of SRI in Canada and worldwide”
6 Data compiled for the second quarter of 2014, which is to say as at 30 June for the year under study.
7 Canadian share-based products also posted superior quarterly and ten-year performance.