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What is Responsible Investing?

Responsible Investing is the evolution of what was previously referred to as Ethical or Socially Responsible Investing. Responsible Investing incorporates environmental, social, and governance performance into the investment management process. These factors include:

Environmental

  • Sustainable land use

  • Climate change

  • Water scarcity

Social

  • Supply chain

  • Aboriginal & community relations

  • Conflict zones

  • Cybersecurity

Governance

  • Executive compensation

  • Corporate diversity

  • Accounting standards

The following abbreviations are used throughout: RI: Responsible Investing; SRI: Socially Responsible Investing; ESG: Environmental, Social, Governance.

Responsible Investment and relative returns

Many individuals experience an internal moral conflict concerning investment decisions: their desire to make profitable investments to benefit themselves and their loved ones versus their desire to conduct their lives, including their investment decision-making process, in a manner consistent with their personal beliefs.

Fortunately, time has shown we do not have to choose — we can do well and do good. As shown below, companies that qualified for the Canadian ESG Leaders index had a cumulative return of nearly double the broader Canadian market over a 12.5 year period.

RI_performance_edited.png

Click for larger image. Source: RiA Canada

In hindsight, it should not be surprising that evaluating potential investments from a broader, long term and big picture view produces better results. Similarly, it is unsurprising that companies with higher gender parity in leadership roles produce better results.

Responsible Investment and financial planning

Responsible Investing can be integrated into your financial plan in a number of ways. Simple screening, integration, engagement, and somewhat more complex thematic investing can all be accommodated.

Screening

There are two approaches to screening. Negative screening excludes investments in particular industries, such as the manufacturers of cluster munitions or tobacco producers. Positive screening might consider only those companies that have signed onto the UN Global Compact.

Integration

Integration builds ESG factors into the investment analysis process. The analysis may include, for example, the impact of potential carbon tax legislation on a firm's future profits, how training and safety programs enhance employee productivity, and a board that operates independently of the CEO can behave with increased objectivity.

Engagement

An engagement approach to RI has investment managers interacting with company leadership to learn about their ESG records before making investment decisions. Once a decision is made to invest in a company, the investment management firm attends all shareholder meetings, votes on corporate resolutions, and proposes resolutions in areas where the investment manager feels that the corporate leadership is lacking.

Thematic and Impact Investing

Responsible Investment that takes a thematic approach focuses on sectors such as renewable energy, clean water, cybersecurity. Impact investing is focused on issues such as women in leadership, healthcare, and affordable housing.

Our commitment to Responsible Investing

IG Wealth Management takes RI seriously.  We are a member of RiA Canada and a signatory to the United Nations-affiliated PRI Association.  Our 2020 RI Transparency Report for PRI and our 2022 Sustainability Report detail our recent efforts, the ESG analyst hub provides five years of reporting, and all of our investment management partners share our approach.

See our digital brochure for more.

Beyond corporate commitments, we employ RI as a core investment planning approach. Hal was the first IG Wealth Management advisor to be certified as a Responsible Investment Advisor and we integrate RI into the financial plans we build for our clients.

 

Would you like to see how we help clients align their values with their investments?

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