More Canadian investors are embracing socially responsible investing (SRI) because of the extra level of scrutiny it brings to the company selection process.
According to the Canadian SRI Review 2012, Thursday by the Toronto-based Social Investment Organization (SIO), the total number of assets invested in the institutional, retail, impact investing and asset managers sectors that follow sustainable and socially responsible guidelines grew by 16% between June 2010 and December 2011. In comparison, total assets under management in Canada grew by 9%.
Looking more specifically at the results, retail investments following SRI guidelines rose 8% in the past year and half to $13.48 billion from $12.43 billion.
Total investment in retail SRI mutual funds, meanwhile, remains small and represents only 1% of all retail assets in Canadian mutual funds.
SRI-focused asset managers, who invest for mutual funds, insurance companies, high net worth clients endowments, corporations and pensions funds, saw a 4% increase in their assets under management to $48.1 billion from $46.3 billion.
More investors are interested in SRI guidelines for their investments, says Ian Bragg, associate director, research, policy and institutional services, SIO, because it adds another layer of due diligence. Scrutinizing companies based on their environmental, social and governance decisions, he says, decreases the risks of unwanted surprises, such as some kind of corporate or market scandal.
Even stronger than retail investments and asset managers, pension funds showed a huge increase in SRI-focused investments. The report results reveal that pension fund assets following SRI guidelines jumped 17% in the past year and a half to $532.7 billion.
Pension funds are embracing SRI standards, says Bragg, because of the potential for long-term financial gain with a minimization of risks, such as reputational risk.
For example, pension funds or other institutional investors who fail to investigate the supply chain of their investments for human rights violations could find themselves facing some bad publicity. Bragg points to the recent fire at a factory in Bangledesh that led to unwanted attention for some large corporations.
The Canadian SRI Review is now in its seventh year. Results are based on a collection of data from surveys of money mangers and impact investment providers, publicly available sources, interviews and self-reported information by pension funds and mutual fund companies.