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Doing well by doing good - it is not necessarily a pipe dream
Numerous scary environmental and social phenomena and trends exist that are making increasingly more people conscious about their own role and responsibilities related not only to what kind of lifestyle and general conduct they pursue, but also to how their invested money is used. Of course, simply by acting as an open-minded, not easily brain-washed, and responsible consumer / worker / business person / citizen / parent, one can make some difference. Minding what kind of companies use the money we invest adds a new layer to this. It used to be the extra mile only few people were willing to walk, just one or two decades ago. Then, it was generally accepted that narrowing the choice from which one selects companies to invest in inevitably causes poorer returns for the investor. Therefore, one was deemed to be either a lunatic, or a saint to consider such 'non-business' factors as environmental impact, health effects of products and processes, labour practices and the like (Corporate Social Responsibility, or CSR is the term often used to summarize relevant factors here), when making investment decisions, ... or perhaps just dirty rich who can afford such a luxury.
As it has turned out since, green business and socially responsible corporate behaviour is not bad business at all. Hence, it is not a surprise that today Socially Responsible Investing (SRI) has been firmly established in many countries. It is a growing phenomenon in Canada as well. SRI stands on three main pillars (positive / negative screening, community investment, and shareholder activity) and it can be practiced in somewhat different forms, and with varying degrees of rigour. During the last few years, the plague of unethical behaviour, even in a much more traditional sense, has been revealed to be widely spread in many corporations. This revelation (in courts, in the media, in books, in ‘The Corporation’ movie, etc.) probably gave further push to the cause of ethical investing and pursuing corporate responsibility issues by both the public and increasingly more institutional investors.
For most people interested in SRI, there is sufficient choice available among the few dozen Canadian mutual funds with green / ethical / SRI mandates. For the purists who think that (some of) these funds are not fastidious enough when picking stocks, there is a more laborious way: picking their own choice and investing directly in companies or various community funds. For the majority though, who have relatively modest amounts to invest, and / or not much time and expertise to make those choices, mutual funds are still the better option, even if they are not perfect, especially in the eyes of these purists. Companies, like individuals, are (practically) never either ‘angels’ or ‘devils’, and they (usually) are responsive to demands of various stakeholders and constituencies. This is why, besides investing in a socially responsible way, we can exercise some positive impact on corporate behaviour as customers, cunsumers, employees, political activists, or simply as caring and enlightened parents as well. There are many opportunities, ... we each should find our own ways to have a positive influence on the future of our troubled planet and humanity.
Like I did with the topic of personal financial planning in general, I refer readers who want a comprehensive introduction to SRI to an external website, in this case that of the Social Investing Organization (SIO). My intention is that instead of trying to repeat what is already there to read, I continue incorporating SRI content regularly in my new series of newsletters.
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These web pages are for information purposes only. The information contained and presented, while based on and obtained from sources we believe to be reliable, is not guaranteed either as to its accuracy or completeness. The content of these web pages is solely the work of the author, Laszlo Kramar.
The views (including any recommendations) expressed on these pages are those of the author alone, and they have not been approved by anybody. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any product discussed or referred to in these web sites. These web pages are for educational purposes only and are not intended for use by residents of the United Sates; nor are they intended as an offer or solicitation in any jurisdiction outside of Ontario, Canada. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
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