Don’t lose sight of the bottom line
Fran Goldberg, a 55-year-old fee-based financial planner and president of Sage Planning in Vancouver, contends that if your main focus is simply getting the best rate of return, SRI may not be for you. Goldberg has about 70 per cent of her own assets in SRI funds — mainly within her RRSP — while her non-RRSP investments are more aggressively held. “SRI feels consistent with retirement and long-term planning,” she says. “I don’t want surprises. But I tend to take more risk outside my RRSPs.”
Goldberg points out that SRI isn’t an all or nothing proposition. Some of her clients hold only socially responsible investments, others have a portion of their assets invested in the category, and still others have none at all. “My job as an adviser is to meet the client’s goals and objectives,” she says. “Whatever they are.”
Her own goals have both a social and a financial component. “I live across from my office by choice. I shop in my neighbourhood. I was recycling before recycling was popular, and using cloth bags before everyone else. SRI is just a natural extension of who I am. It really is about supporting people who are trying to make a difference.”
Don’t lose sight of the bottom line
Fortunately, she and other ethical investors won’t have to give up a comfortable retirement to fuel their convictions. Although critics of SRI often tout lacklustre returns as one reason to stay away from it, the evidence doesn’t bear them out. From its inception on Jan. 1, 2000, through March 31, 2008, the Jantzi Social Index (a bundle of socially and environmentally screened stocks) reaped an annualized return of 7.91 per cent, compared to 7.80 per cent for the S&P/TSX 60 and 7.94 per cent for the S&P/TSX Composite. Not all SRI funds are world-beaters, but most stack up very well against funds without ethical screens. “There’s no need to sacrifice returns,” says SIO’s Ellmen. “This is one of those situations where investors can have it all.”
What’s more, he contends, there’s an argument to be made that SRI is innately more investment-worthy. Companies that have good labour relations should have lower levels of absenteeism and higher levels of job satisfaction, Ellmen points out. And oil and gas companies that work to reduce their greenhouse gas emissions and invest in renewable energy will be less vulnerable when carbon credits start being traded. “Having a social conscience can often make good financial sense,” he says.
Ultimately, though, the selling point of SRI for most investors has more to do with the world they want to live in than a half-percentage of return either way on investment. As Meritas CEO Gary Hawton once asked: “If you’re saving for your future so that maybe some day you can retire to your cottage by the lake — do you want to be able to swim in the lake or not?”
Where to begin
There are more than 100 mutual funds available in Canada that are screened using ethical criteria. To explore further, check out the following resources:
- The Social Investment Organization’s website has a listing of investment funds and indexes that specialize in socially responsible investing (SRI), as well as a “Find a financial adviser” feature, with links to SRI-savvy advisers across the country.
- Big players in the SRI industry include the Ethical Funds Co., Meritas Mutual Funds and Inhance Investment Management.
- A growing number of large financial institutions have begun to offer SRI alternatives, among them Acuity Investment Management (four funds), Phillips, Hager & North (four funds), RBC Asset Management (three funds), Barclays Global Investors (one fund) and TD Asset Management (one fund).
- Jantzi Research is an independent investment research firm that evaluates and monitors stocks using social and environmental criteria.
This article originally appeared in the October 2008 issue of More
