The past decade has seen a lot of positive evolution for Socially Responsible Investing (SRI). 10 years ago, only a few investment firms offered SRI options, and these funds were usually viewed as niche offerings with higher management fees and lower returns.

This is certainly not the case today. In the past three years, Royal Bank, Fidelity, BMO, and Mackenzie Investments have all launched SRI funds. This adds to SRI options already offered by AGF, NEI, IA Clarington and Desjardins. We can now construct an SRI portfolio that offers the same diversification, competitive fees and returns as a non-SRI equivalent.

There is a misconception that owning an SRI fund means investing primarily in a portfolio of clean-energy stocks. There is more than one type of SRI strategy; some more aggressive than others. Many SRI funds don’t look very different than a regular mutual fund. The more common SRI strategies are as follows:

Shareholder Engagement: These funds use shareholder power to directly influence corporate behaviour. For example, filing shareholder resolutions, engaging in dialogue and voting proxies with companies to improve their Environmental, Social, and Governance (ESG) issues. These funds are the most likely to resemble a regular mutual fund.

ESG Integration: These funds explicitly embed ESG issues into the stock selection process. Therefore, you own companies with a solid financial and ESG track record. These funds can also look very similar to a regular mutual fund.  Oil companies can still factor into this type of strategy. The aim is not to exclude energy or any other industry, but to look for the companies in these industries with the soundest ESG policy and record.

Negative Screening: This strategy excludes certain industries all together. For example, a fossil fuel-free global equity fund will exclude exposure to companies directly engaged in the extraction, processing and transportation of fossil fuels such as coal, oil and natural gas. Besides this exclusion, the other holdings will be familiar blue-chip names in other industries.

Thematic Investing: This is the most aggressive of the SRI strategies. These funds will have theme-specific mandates such as clean technology, women in leadership or alternative energy. The holdings will look very different than your average global or domestic equity fund. The risk may also be significantly higher as you are investing in non-established industries.

If you are interested in discussing SRI options in your portfolio, please contact our office.


This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.