Socially Responsible Investing

This post was written by the former Estonian Credit Union, now Northern Birch Credit Union.

Socially Responsible Investing 101 

Socially Responsible Investing is an option for you to make money, while making a difference. We’ve all heard about key news issues like oil spills, community protests, factory collapses…have you thought about how they impact your investments and the world? Well, that’s where Socially Responsible Investing (SRI) comes in.

What is Socially Responsible Investing? 

It’s an approach to mainstream investing that works to reduce environmental, social and governance (ESG) risks.

Socially responsible investing and the analysis of environmental, social and governance risk

SRI is more than you might think – it invests in mainstream, multinational companies based on their financial performance and ESG factors. It’s more than screening for “good and bad” companies. It’s actively working with them to improve their standing.

The investment process includes 4 steps:
1. Identifying opportunity through financial analysis
2. Identifying less quantifiable risk through environmental, social and governance analysis
3. Building a portfolio with companies that fulfil both fund objectives and ESG criteria
4. Actively influencing change through corporate engagement

Traditional financial analysis + ESG analysis = less potential risk

Socially Responsible Investing Myths

1. SRI is a niche and a fad.

  • SRI grows year over year, especially popular in Europe but is still mainstream in North America. Usually institutional investors are “early adopters” soon followed by retail investments funds.

2. SRI limits the investment universe.

  • All portfolio managers use some kind of process to narrow their investment universe. In the case of SRI, it is environmental, social and governance analysis.

3. SRI solutions under-perform conventional funds.

  • Actually, leading SRI Funds in Canada can and do outperform conventional funds and their benchmarks – this is a direct result of quality portfolio managers and a more in-depth ESG process.

ECU offers many Socially Responsible Investing options. Contact us in branch today to explore what’s right for you!

Information provided by NEI Investments.
The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal advice. Please speak to your personal financial representative before making any investment planning decision or implementing any strategy. Mutual funds are offered through Credential Asset Management Inc. Commissions, travelling commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing.

Author: NorthernBirchCU

A co-operative financial institution based out of Toronto, Ontario.

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