You earned your money through a series of decisions: which opportunities made sense for your circumstances, met your needs, and ultimately reflected who you are as an investor. And now that you’ve accrued some wealth, it’s fair to want your money to keep earning for you in the same way: accountably, responsibly. Welcome to Responsible Investing (RI).
Greenwashing? Environmental, Social, and Governance (ESG)
It’s not enough to simply find undervalued investment products and bundle them up. There are strict criteria for the baskets that are clamoring for your capital. If you’re the kind of shopper who chooses green and local, are looking at an electric vehicle, and are concerned about the legacy we’re leaving for future generations, there are investment tools finely-tuned to reflect your values and deliver consistent performance in the marketplace. At the end of the day, these products need to prove their value, and they do. They can’t simply declare themselves “green” and be taken seriously by fund managers.
RI incorporates environmental, social and governance (ESG) factors into investment portfolios. These portfolios incorporate brands that value sustainability, human rights, good working conditions, employee diversity, resource conservation and other factors. The underlying companies are constantly vetted by portfolio managers, who are active shareholders and represent your interests inside the company, giving you a voice.
With a PR cycle that’s literally measured in seconds, a single tweet can change the perception of a brand’s ethics. Whether that’s broken promises, supply chain issues, or labour conditions, a brand’s clout is vulnerable, as is its ability to trade.
Long-Term Thinking = Better ROI
RI investments require that brands commit to ethics over the long haul, so it’s only fair that your capital is committed to a longer timeframe as well. Fortunately, that pays off over the long term.
In a study conducted by the Responsible Investment Association, 77% of participants agreed that companies with good ESG practices are better long-term investments. When companies create value by incorporating ESG factors, they can attract better talent, build loyal customer bases and prosper through strong oversight.
Consumers prefer to support sustainable, innovative brands that positively impact the world, and they are more inclined to invest and hold investments with these ventures.
The bottom line is that RI brands, and the investment products linked to the equity market for those brands, historically perform above market averages. There’s no need to compromise your values when looking for a solid return on your investment.
No Need to Compromise
You don’t need to compromise your values when investing, and neither do you need to lower your expectations for performance. RI products have seen a fourfold increase in capitalization over the last decade, and have recently tipped over the 50% threshold of all investments in Canada. The market is getting the message. More capital in the mix means more opportunities for companies looking to innovate and contribute to the well-being of all, not just their shareholders. As a result, the capital that charges the batteries of such companies enjoys a competitive return.
All Advisors Are Not The Same
As an investor, you have a say into what goes into your portfolio. Speak with a Financial Advisor about any sectors that might be off-limits to you personally, and those that mesh with your values. Together you’ll craft a strategy that meets your financial goals as well as putting your money to work the way you earned it — with integrity.