Back to the Basics
Finance Tips More and more Canadians are investing responsibly — Dustyn Lanz outlines the impact that responsible investing brings to society and your wallet.
Mediaplanet: What is responsible investing?
Dustyn Lanz: Responsible investing (RI) refers to investments that incorporate environmental, social, and governance (ESG) factors. There are numerous RI strategies. For example, a growing number of investment firms are integrating ESG issues into their financial models to identify risks and opportunities that might not show up in a company’s financial statements. You could also build an RI portfolio by “screening in” sustainability leaders and “screening out” sustainability laggards. Or you could invest in a fund that focuses on a specific ESG theme such as clean technology or women in leadership, or a fund that engages with companies to improve their sustainability performance.
MP: What is the importance of responsible investing?
DL: A company is more than just the numbers. Incorporating ESG issues into investment decisions provides investors with a more comprehensive view of a company and whether its returns will be sustainable over the long term. As an investor, it’s irresponsible to ignore ESG issues, because these are some of the most important drivers of change in the global economy today.
MP: What types of responsible investments are available? How do I know which are best for an investor?
DL: Responsible investments are available to all investors, big and small, across all asset classes. There are RI mutual funds, exchange-traded funds, and GICs, and a wide range of responsible investment products available to both individual and institutional investors. The best place to start is to ask your financial advisor to provide you with some responsible investment options that are suitable for your risk tolerance and financial goals.
MP: How do responsible investments perform against traditional investments?
DL: A growing body of evidence shows that responsible investments perform just as well, if not better, than traditional investments. For instance, a 2015 Carleton University study found that responsible Canadian equity mutual funds outperformed traditional equity funds 63 percent of the time, and with lower levels of risk and volatility. A study by the Morgan Stanley Institute for sustainable investing found similar results for the U.S. market.