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Socially responsible investing
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?
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Adena Franz
First
Vice President,
Portfolio Manager
Richardson GMP
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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:
www.sriintherockies.net
www.amnesty.ca
www.socialinvestment.ca
www.corporateknights.ca
http://www.jantziresearch.com
We'd love to hear how you are involved with socially responsible
investing. Please send us your story by e-mail to Pina.Tria@RichardsonGMP.com,
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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