Ethical investing makes strides

INVESTMENT REPORTER

Canadians pumped more than $106-billion into so-called ethical investments since 2006, as they paid as much attention to their consciences as they did to corporate balance sheets.

The Social Investment Organization, in a report to be released today, said "assets invested according to socially responsible guidelines" increased to $609-billion in the past two years, a gain of 21 per cent from $503-billion in its 2006 survey.

"In spite of these difficult times, there is evidence that Canadians want their investments to post solutions to global social and environmental issues, not simply profit from the status quo," the report stated.

The report drew on data collected from money managers and finance providers, as well as publicly available data from pension funds, mutual funds and renewable energy income trusts. The numbers, which run from the beginning of 2006 until June, 2008, have likely taken a substantial tumble since that time, along with the general stock markets.

"Obviously assets are likely lower along with the whole market," executive director Eugene Ellmen said. "But I think the important thing is the proportion of the market for socially responsible investments has stayed firm at just under 20 per cent. There's no reason to believe that has changed."

There are two broad categories that the agency measures - core and broad strategies.

Growth since 2006 was in the broad category, as more pension and endowment funds adopted policies that integrated environmental, social and governance factors into their investment decisions. The amount invested increased by 26 per cent to $544-billion by mid-2008.

"While the increase is substantial, the growth rate between 2006 and 2008 was much smaller than the growth rate between 2004 and 2006, when a number of pension managers first adopted responsible investment policies," Mr. Ellmen said.

The core strategies include the more traditional methods of ethical investing, such as fund managers implementing screens for their clients that exclude certain companies based on their products or activities. It also includes retail investment funds and community investment funds. Those assets decreased by 5.6 per cent since 2006 to $54.17-billion, a drop the agency blames on "general market conditions."

Patti B. Dolan, a senior investment adviser at Research Capital Corp. in Calgary, suggested ethical investments to her clients almost 25 years ago. She grew accustomed to being called a "tree hugger" and having to painstakingly outline the benefits of responsible investing to clients and colleagues - better corporate governance, more environmental accountability, stronger community involvement.

"I was considered a tree hugger and there wasn't a lot for me to work with," Ms. Dolan said. "I had two funds to choose from, and an awful lot of explaining to do."

The landscape has changed considerably since then, she said. Canadian investors have access to literally dozens of mutual funds and exchange-traded funds with a social mandate, although she tends to run her own screens and select individual stocks.

"Many of the things you could buy today didn't even exist five years ago," she says. While ethical investors may shun certain companies or sectors, their returns haven't suffered. Indeed, the Jantzi Social index - which comprises 60 Canadian companies that passed a set of social and environmental screens - is up 10.5 per cent on the year, while the broader TSX/S&P 500 is up 5.1 per cent.