Responsible Investing: Do Well by Doing Good
By Interior Savings
February 7, 2020
It’s 2020 and supporting companies that align with your beliefs and values is more important than ever. We get it! That’s why we offer Responsible Investing. Why not make money while making a difference?
What is Responsible Investing?
Simply put, Responsible Investing is asking your money to do more. Not so simply put, Responsible Investing combines the analysis of environmental, social, and corporate governance (ESG) factors with traditional financial analysis when making decisions on which companies to invest in.
There are plenty of multinational companies that are taking steps to make the world a better place through progressive business practices while maintaining growth and strong returns. These companies have additional goals such as reducing environmental impact, supporting their employees with fair compensation and safe work conditions, and creating a work culture that is inclusive and empowers women. All without compromising the bottom line. In fact, research shows Responsible Investment funds frequently outperform traditional investing approaches. (from Responsible Investment Association)
Companies that take these mandates seriously are less likely to get caught up in controversies like environmental disasters (e.g. oil spills) or community protests (e.g. human rights rallies). Proactive responsible business practices protect companies by reducing their exposure to risks that may not be visible to the average investor on paper. This adds a layer of risk protection to your investment while helping to affect long-term change in the world. The more we invest in companies with these values, the more other companies will follow suit.
How does a Responsible Investing mutual fund work?
A mutual fund is a way for people to diversely invest in stocks, bonds, or equities with their money managed by a professional investment company. When putting together a responsible investment mutual fund, the fund manager investigates companies to determine their ability to deliver value in the long term. They also look at the company’s ESG standing to determine their ability to deliver a positive impact on the world and the people in it.
Fund managers don’t just label companies as “good” or “bad” either. When they buy enough shares to earn a seat on the shareholder board, they are able to affect change from within by helping the company improve their ESG practices through dialogue, shareholder resolutions, and proxy voting.
Who is taking advantage of Responsible Investing?
The rate of responsible investments across Canada and the world is on the rise. As of December 2017, reports show that responsible investment assets in Canada grew 41.6% over two years reaching $2.1 trillion. With climate change and political and social tensions on everyone’s mind, the demand for socially conscious investments is only going up.
With Responsible Investing, members can direct their investments towards companies that are advocates for things like human rights, female representation, and environmentalism. Members can also decide where they don’t want their money to go; to companies that exploit workers, deal in firearms, or destroy the planet.
At Interior Savings, you have a say in how your money is invested. Come talk to us about your financial goals and the causes that are close to your heart so we can help build you a portfolio that helps you do well by doing good.