We all want to leave the world better off than when we arrived. The growing interest in Responsible Investing in Canada and around the world clearly reflects that desire. In my 2018 video on the topic, I explained some of the basic methodologies that investment managers and index providers use to tilt a portfolio towards more responsible companies. In the year since the video was released, there have been some significant developments in Responsible Investing, so I figured it was time for an update!
There have been two very significant events in the last year:
Homegrown thought leadership
Following the G7 meeting in Charlevoix, Québec, in June 2018, the Caisse de dépot et placements du Québec and the Ontario Teachers’ Pension Plan announced a new international alliance of pension plans, representing over $6 Trillion in investment assets. One of the three stated goals of this alliance is to “speed up the implementation of uniform and comparable climate-related disclosures”. In other words, they want to standardize the way in which companies measure and report their environmental impact. The alliance will also focus on increasing diversity in the investment industry, by promoting more opportunities for women in finance. Finally, they will work together to enhance expertise in infrastructure financing and development for emerging and frontier economies.
The Caisse then released its first Stewardship Investing Report, which details how it has reduced the carbon intensity of its portfolio by 10% in the last year, with a further goal to reduce another 15% by 2025. The Caisse has even changed its compensation practices to incentivize its managers to reduce the carbon intensity of their portfolios, in order to achieve these objectives. I find it really exciting to have an organization right in our own back yard that is taking a global leadership role to encourage more responsible investment practices.
These are major movements. When you have some of the world’s most influential investors coming together to press specific issues, companies listen. In the past, as an individual investor, investing in “responsible” companies was a niche thing; not anymore.
Even you can Invest Responsibly
How can you add your voice to some of the largest investors in the world? Tilting your own investments to socially responsible companies used to be a costly venture. For example, the iShares Jantzi Social Index ETF in Canada charges about 0.55% in annual fees. That’s relatively expensive when you compare it to the fact that you can buy a TSX Composite ETF for 0.05%.
In September 2018, Vanguard came to market with two ETFs that cover the US and International stock markets for 0.12% and 0.15% respectively. At that level, the extra cost of switching to a responsible portfolio is almost negligible.
The only problem is that the Vanguard ETFs only trade on the US exchanges. Thankfully, RBC iShares has just released a full suite of ETFs that trade in Canada, and cover the Canadian bond market, as well as the Canadian, US, International and Emerging stock markets. They are a little bit more expensive, ranging from 0.18% to 0.35% in annual fees, but they offer a complete set of tools covering both stocks and bonds, that you can buy in Canadian dollars, to build a portfolio that is tilted towards responsible companies.
The responsible investing landscape is evolving quickly because of strong investor demand. I expect to see BMO and other major ETF providers come to market with more funds, to increase the options available to investors. The SRI door is open to anyone who wants to align their investments with their personal values; and the options for investors are only getting better.
PWL – Responsible Investing eBook
As with the emergence of any new investment style, researching the pros and cons of a strategy can be a daunting task. To help you wade through the overwhelming amount of media on the subject, we’ve put together an eBook titled: Responsible Investing – Putting your money where your values are.
As always, let me know what you think in the comments below!