Taking Action My advisor does not recommend the socially responsible investment route

For any number of reasons, your investment advisor may be reticent to recommend SRI products to you. Following are three possible scenarios and action to take in each instance.

Scenario 1

Your financial advisor understands your concerns and is interested in learning more on the subject, but does not know about this kind of investment or does not have sufficient information. In this instance, direct him or her to the Ethiquette website where they will be able to learn about the various products and product types on offer.

Scenario 2

  • Your advisor does not wish to discuss investing in RI products for one or more of the following reasons:
  • He or she in uninterested in the subject.
  • He or she does not understand socially responsible investment and is not interest in learning more about the subject.
  • He or she does not enjoy requisite company support for SRI which would necessarily compromise his or her compensation.
  • He or she is afraid of doing things differently and losing what he or she has established to date.
  • He or she honour company culture and the company is uninterested in the socially responsible investment route.
  • He or she is used to being the one who advises the client.

Endeavour to understand the reason for your advisorʼs reaction so that you can adapt your approach. If your advisor tells you that he or she does not have sufficient support from management, you might wish to send the manager a letter explaining that as a client, you would appreciate support for and incorporation of RI into the companyʼs offering (See the sample letter in the Ethiquette Resource Centre).

You may also direct the advisor to the Ethiquette website where they peruse findings from studies conducted by the Responsible Consumption Observatory, findings which reveal the extent to which RI represents a growing and promising market.

If he or she is still uninterested, remain firm and explain that you will be contacting another financial advisor or bank to move forward with your investment plans. Then, return to Step 1 – Find a suitable financial advisor.

Scenario 3

If your financial advisor explains that RI products compromise your financial situation too much, do not provide the same returns as non-RI funds or that you will lose money, it is because he or she has failed to conduct an overall analysis and is unfamiliar with the findings from key studies on the topic. Indeed, these studies relating to financial performance product analysis (such as those by Fundata or MorningStar) demonstrate that RI funds generally perform as well as or better than those of the sector as a whole. You may suggest that the advisor visit the Ethiquette website section on financial performance. If he or she is still uninterested in RI, return to Step 1.

If your financial advisor now appears confident about socially responsible investment products and is interested in assisting you, proceed to Step 3 – Determine the responsible investment products best suited to your investor profile.

Conclusion

In conclusion, bear in mind that when you choose a responsible investment, it does not mean that you are investing solely in companies with perfect environmental and social records. For example, do not expect a socially responsible investment fund to be made up entirely of wind turbines and organic agricultural cooperatives. The truth is that most investments which pay interest or dividends derive from major publicly traded international corporations. These corporations are large enough to need investment funds and are considered less risky by investors.

That said, the role of socially responsible investment is:

  1. to support companies which institute positive socially and environmentally responsible measures;
  2. to attempt to influence less responsible companies by pointing up the benefits of adopting best practices; and,
  3. and to promote companies which, through direct impact, help resolve social and environmental challenges.

Indeed, at general meetings of shareholders, socially responsible investment managers regularly employ share capital-related rights to engage in dialogue with management about environmental and social responsibility, and to adopt positions intended to ameliorate company performance in this regard. Some RI managers produce annual ESG investment reports and are fully transparent about opinions expressed and the manner in which they exercise their vote at companies in which they invest. By consulting these reports, you will better understand why and how your investment in a socially responsible investment fund differs from the traditional path.

Remember that you are primary individual responsible for choosing your investments and that the best time to start investing in your future, and that of your community, is now!