Invest for Change


There is a common trend that I have noticed among many of the new clients we have taken on this year. Our new clients are looking to ensure that they are invested in ethical businesses. Socially responsible investing (SRI), sometimes shortened to “responsible investing” or RI, means putting your money in companies that score well in environmental, social, and governance factors. A more common trend these days is in areas including low carbon emissions, but can vary into many different areas including gender diversity. If statistics are any indication, this is a trend which we can likely expect to continue. According to the Responsible Investment Association, SRI assets rose 41.6% over the past two years. With growing interest, the question ultimately becomes what is the best way to invest in SRI?


Eclipsing the growth of SRI is the growth of Exchange Traded Fund investing. Today, you can pretty much find an ETF for any specific type of investment you are looking to make, including SRI. The Canadian market has had a socially responsible ETF available since 2007 and today there are many options available. If you really want to dive deep into the details of what you own or if you care about specific causes, SRI ETF’s can provide you with a more targeted investment. Some ETF’s are broad in their mandate, including Horizons Global Sustainability Leaders Index ETF, which invests in companies which score well in reducing carbon emissions and are not involved in businesses such as tobacco, guns, animal cruelty, and gambling. Desjardins Funds offers more targeted ETFs which are branded “low CO2” funds, which as the name suggests focuses just on low CO2 emissions.


Mutual fund companies have also offered SRI investments for some time, and have often focused on a broad range of social causes. Many mutual fund managers who focus on SRI will use a score card, like that of Horizons as mentioned above, and target companies which fit their criteria for being environmentally friendly, gender diverse, non-tobacco and weapons etc. The difference between the actively managed fund and the ETF is that the manager will take their analysis a step further and invest in companies which they think will outperform their target benchmark as well. It is not enough just to fit their criteria for SRI, they will also look at the quality of the business as well.


In our business we don’t specifically use SRI investments but rather choose to invest directly into companies ourselves which we believe are upstanding contributors to society. We look at many different analysis points before choosing an investment including cash flow, price to earnings, profitability, economic moat and also ethical management practices. We have chosen to focus on companies with ethical practices for two reasons. First, because it is a part of our own values system. The core mission of our business is to “make lives better” and so it would be hypocritical of us if we didn’t invest in companies which try to do the same. Secondly, in the world we live in today consumers are looking to buy from and work with companies who are doing good in the world. People want to support the companies that are making a difference. They want to be a part of the movement, a part of the change for the better. So not only does investing in socially responsible companies make sense for our conscience, it also makes sense for our bottom line as well. It seems simple but there are challenges.



To start with, what is your definition of socially responsible? Many of our clients have a different definition of what it means to be socially responsible. Most agree that they don’t want to invest in weapons manufacturers or tobacco companies, but how do you feel about oil companies? Pipelines? How about companies that lend money to oil and pipeline companies? I once had a conversation with someone at a mixer about their idea of socially responsible investing. They were so committed to the idea of not supporting weapons manufacturers that they couldn’t invest in US banks who had lent money to Boeing, because Boeing makes fighter jets. This is where investing in some of the SRI funds can be difficult because there is fuzzy branding behind what they do. In addition you have to place trust in your portfolio manager and hope that their definition of socially responsible matches yours. In our experience, we have found that it is far easier and far more profitable to just invest in the companies directly ourselves. In every one of our client discoveries we ask about the causes that are close to the hearts of our clients. If we uncover that they are passionate about certain areas such as gun control, or green energy, we can customize their portfolio for them and ensure they are not invested in anything that goes against their system of values.


As Investment Advisors this is a trend that we expect to continue long into the future. Other wealth managers would be wise to catch on and start developing a strategy for it as we have. For investors, having transparency provided for you, knowing what you are investing in can ensure you are living your values. I think it is also worth noting that companies will adapt to where profits are coming from and so if you feel strongly about certain causes, make sure that your investment and consumer purchases are following along. Dollars can make a huge difference and will force change in time.


-Grant White, CIM®, CFP®

Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.


This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.

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