Poke the conscience of investors and you’d be surprised at how many are attracted to the idea of investing their money so that it improves the world in some way. Socially responsible investing (SRI) taps into this impulse, and gives us numerous ways to act and make a difference.

What does SRI mean? Often we hear this: avoiding companies that exploit children or are involved with the “sin” industry: arms, cigarettes, or illicit drug industries. What about the other sectors such as energy, financial and material resources?

A Macleans’ report in June generated discussion on how and why they had included some companies in these industries amongst those that are making our country a better place. The discussions had to do with environmental rights, carbon dioxide emissions and aboriginal relations.

Essentially, some readers didn’t agree with selections because they disagreed with the criteria used to select them. And herein is the point: who gets to make up the questions and decide on the answers?

The answer is simple: you do. As an investor, you have the choice to decide what’s important to you and what you will include or exclude. From there, you do the research on companies and decide what to buy and sell.

It’s a ton of work. After a while, many investors throw up their hands and decide to follow a generic choice, such as a mutual fund whose name includes the word ethical, clean or responsible.

Here’s some help

Canada’s Social Investment Organization (www.socialinvestment.ca) defines socially responsible investing as the inclusion of social, environmental and governance considerations into the management and selection of investments.

It gets even more exciting.

There are two main categories, one called core SRI, the other called Broad SRI. Core SRI looks at the values of the companies considered whereas broad SRI focuses on the money side of how the company deals with environmental, social and responsible governance issues. You’ll get used to seeing the last phrase referred to by its acronym ESG.

When stating their preference for avoiding tobacco companies, investors are, for example, “screening” out companies based on their values, a core SRI strategy. You can screen positively as in choosing to include companies, or negatively by defining which companies you don’t want. Zenn Motor Co. gets points for manufacturing cars that produce zero emissions and make no noise. If you make a selection solely on what the company does or doesn’t do, however, you leave out an entire list that reviews, among other things, employment policies, environmental considerations, financial risk, reporting standards, and corporate responsibility.

Some investors focus on how companies invest or give back to communities. VanCity Savings and Citizens Bank are known for issuing loans to borrowers selected for their community economic development.

Broad SRI is a large broom used to evaluate the ESG considerations together with financial management. Governance is a particularly hot word in boardrooms these days where individual can be held liable for company actions long after they have resigned.

Alternatively, you could become a shareholder activist. As an owner of the company’s stock, you exercise your right to your opinions by having them noticed in letters to the Executive and your votes counted at shareholder meetings. Shareholders often pressure management issues, file shareholder resolutions, and significant shareholders can threaten to sell their shares. Organizations such as Amnesty International Canada launch successful campaigns that pressure companies on a wide range of human rights issues such as doing business under repressive regimes, factory conditions and workplace discrimination.

It’s huge

Socially responsible investing has become a big global business that serves booming markets in North America, Europe and the UK. The 2008 SRI in the Rockies Conference attracted over 700 participants who “work to direct the flow of investment capital in transformative ways.” Government-controlled funds such as pension funds are under pressure to adopt investment policies that take ethical corporate behavior into account. According to the 2007 Report on Socially Responsible Investing Trends in the United States, there are more than $1.9 trillion in socially screen separate accounts and more than $179 billion in socially responsible mutual funds.

In Canada, Jantzi Research has evolved since 1990 to become one of the leading firms providing research to companies, pension and mutual funds. It’s created the Jantzi Social Index, a useful benchmark by which to measure performance. Corporate Knights, an independent magazine created in 2002 is dedicated to humanizing the marketplace. It’s a terrific resource for indepth reports, some at very sophisticated levels.

Socially responsible investing is fascinating because it’s where investors get to put their money where their mouth is. They fulfill not only the impulse to do and feel good, they can get involved in so many ways to create a better and more responsible world.

If you’re interested, here is a short list of online resources:

We’d love to hear how you are involved with socially responsible investing. Please send us your story by e-mail to [email protected],
or write us at:

Richardson GMP, 1250 René-Lévesque West, Suite 1900, Montréal, QC H3B 4W8.

Adena Franz is a First Vice President and Portfolio Manager at Richardson GMP. She can be reached at 514-989-4861.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.

Richardson GMP Limited, Member CIPF. Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.

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