Investors are pouring money into socially responsible investment products at a record pace, according to a report by Toronto-based Social Investment Organization. The study says assets in socially responsible investments grew to more than $503 billion in 2006, up from $65 billion in 2004.

SIO says the surge is led in large part by public pension funds, which are flocking to SRI.

“Managers are beginning to understand that they have to start incorporating social responsibility into their portfolios or there could be issues that pose significant risk to their future performance,” says Eugene Ellmen, SIO’s executive director.

Pension funds such as the Canada Pension Plan only recently began to adopt broad SRI policies into their investment strategies, the report says.

Ellmen is encouraged by the newfound understanding and awareness of SRI, but he remains cautiously optimistic that the trend will continue.

“We take the view that this is how mainstream investment management will be done in the future, but it’s going to take a while for analysts, trustees and investment managers to figure out how to integrate these practices into their portfolios,” he says.

The uptick in interest is good news for socially responsible investment firms such as Cambridge, Ont.-based Meritas Mutual Financial Inc. , which manages seven SRI funds, including the Jantzi Social Index Fund and the newly launched Meritas Monthly Dividend and Income Fund.

The company has seen its assets soar by more than 120% since 2004, and recently closed its best RRSP season to date. CEO Gary Hawton says the stigma of poor performance is becoming less of an issue as investors learn more about the benefits of SRI and become more socially conscious of how their money is invested.

“The overall interest has been enormous,” Hawton says.

The SIO report says SRI assets currently represent slightly less than 20% of all assets under management in Canada, compared with only 4% two years ago. IE