Fundamentals of Socially Responsible Investing

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Fundamentals ofSocially Responsible Investing
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Definition of SRI

• Socially Responsible Investment (SRI) is the
  integration of environmental, social and
  governance factors in the selection and
  management of investments.

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Historical Roots

• Churches
• Credit Unions
• Labour Movement
• Environmental Movement
• Womens Movement
• Local development groups

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A Global Movement

• 2.29 trillion in SRI assets in US
• 9 of funds under management in US
• More than 1 trillion euros of SRI assets in
  Europe
• Growing in Asia, Australia

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Canadian SRI

• Canadian Socially Responsible Investment Review
  2006
• 503.6 billion in assets invested under SRI
  guidelines
• Up from 65.5 billion in 2004
• Currently almost 20 investment market
• Over 50 funds available to individual investors

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Canadian SRI

• Growth in last two years primarily due to
  adoption of SRI policies at large public pension
  funds
• Examples CPP Investment Board, Caisse de depot,
  British Columbia Investment Management Corp.,
  Ontario Municipal Employees Retirement System
• Funds are engaging with companies and/or voting
  their proxies on ESG issues

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Components of SRI

• Core SRI (values and financial analysis)
• Positive and negative screening
• Community investment
• Ethical lending

• Broad SRI (ESG risks and returns)
• Integration of environmental, social and
  governance factors (ESG)
• ESG corporate engagement and proxy voting
• Sustainable venture capital

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CORE SRI Screening

• Negative criteria to exclude investments on
  social or environmental issues
• Positive criteria to seek out investments based
  on best of sector or ideals of sustainability or
  social responsibility

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CORE SRI Community Investment

• Providing capital for local community development
• Thinking globally, acting locally

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CORE SRISocially Responsible Lending

• Subjecting commercial loans to social and
  environmental screens
• VanCity and Citizens Bank leaders in this area

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BROAD SRIIntegration of ESG

• Assessment of how environmental, social and
  governance issues affect stock values and
  prospects
• Unfavourable companies not necessarily screened
  out
• May be underweighted
• Companies with good prospects overweighted

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BROAD SRICorporate Engagement and Proxy Voting

• Using your power as an investor to encourage
  companies to become more responsible and
  sustainable

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BROAD SRISustainable Venture Capital

• Private investments in small and medium-sized
  firms emphasizing sustainability
• Energy conservation, environmental clean-up,
  recycling, alternative energy, organic production
• Also known as Cleantech

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Social Investment Fund Offerings

• SIO listed mutual funds must
• Include social or environmental criteria in
  investment objectives
• Set these objectives out in the prospectus

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Stocks

• Neutral stocks acceptable for core portfolio
• Exemplary stocks preferred to push the margins
• Offensive stocks can be held with active
  shareholder strategy

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SRI and Profitability

• Profitability can vary in short term
• Periods favouring defence, gold stocks biased
  against SRI funds
• Long-term tendency to SRI outperformance

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SRI and ProfitabilityDomini Social Index (DSI)

• US-based basket of 400 socially responsible
  stocks
• Most recognized SRI index
• Launched May 1, 1990

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SRI and Profitability

• Jantzi Social Index
• Canadian socially responsible investment index
• 60 stocks
• Launched January 1, 2000

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SRI and Profitability

• University of Western Ontario study (Cnd.
  Investment Review Winter 2001)
• Finding No penalty for SRI
• May even decrease risk exposure

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Resources

• Global Profit and Global Justice, Deb Abbey
  (just released)
• The Ethical Investor, David Skinner
• Socially Responsible Investment A Global
  Revolution, Russell Sparkes
• The SRI Advantage, Peter Camejo

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Resources

• Internet Sites
• www.socialinvestment.ca
• www.jantziresearch.com
• www.socialfunds.com
• www.sristudies.org

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Disclaimer

• The opinions, estimates and projections contained
  therein are those of the author as of the date
  hereof and are subject to change without notice
  and may not reflect those of Research Capital
  Corporation ("RCC"). The information and opinions
  contained herein have been compiled and derived
  from sources believed to be reliable, but no
  represenation or warranty, expressed or implied,
  is made as to their accuracy or completeness.
  Neither the author nor RCC accepts liability
  whatsoever for any loss arising from any use of
  this report or its contents. Information may be
  available to RCC which is not reflected herein.
  This report is not to be construed as an offer to
  sell or a solicitation for any offer to buy any
  securities.

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