Responsible investing (RI) involves incorporating environmental, social, and governance (ESG) factors into the selection and management of one’s investments. Other familiar terms may include; SRI, community investing, social finance, green investing, ethical investing, or impact investing.
Interest in this type of investing has grown significantly in recent years, as many investors feel that it's important to choose products and services that are sustainable and consistent with their overall values.
How does RI work?
Some examples of the ESG factors that may be considered are; a company’s human rights policies, working conditions, executive compensation, gender pay equality, climate change, water scarcity, emissions reporting, public scandals, animal testing and community relations.
Why does RI matter?
Aside from wanting to support positive change in our world, we feel that companies with good ESG practises are better long-term investments. Two examples of companies that may not have met certain ESG criteria and suffered significant losses were:
shares of British Petroleum plummeted 55% after the Deepwater Horizon explosion in 2010. BP was cited for 760 health and safety violations leading up to the incident.
Volkswagen shares fell 35% in less than one week in 2015 due to the emissions issues, and poor corporate governance.
How can you participate in Responsible Investing?
Most publicly traded companies now display their ESG factor information or ratings online. There are also many mutual funds and ETFs whose mandate is only to invest in companies that pass different ESG standards.
Responsible investing is important to our team and we are now incorporating ESG investments into our model portfolios. Samantha Seaman is a member of the Responsible Investment Association. If you would like more details or to discuss RI options available to you, please contact us.