Myth 1: Socially responsible investing means sacrificing the return on my investment
Actually, you don't have to sacrifice good returns to support environmental and social causes: SRI takes both corporate social responsibility and financial performance into account.
Every investor wants to see their money grow, and that's no less true for investors who want more than just good financial performance from their investment.
SRI is one of the ways we can make a difference on issues that often weigh heavy on our social conscience, like environmental disasters, financial scandals and child labour.
Myth 2: SRI is for idealists
Not quite. The first socially responsible investors were simply concerned about upholding their values and principles. They wanted to make sure their money wasn't supporting oppressive regimes, what they saw as unhealthy lifestyles or activities that could put people in harm's way.
Today, we decide where to put our money based on our individual investment horizon and tolerance for risk, but we also have the option of integrating our support for sustainable development into our investment strategy.
It's an approach favoured by many institutional investors--including pension plans, religious foundations and labour funds.
Myth 3: SRI is just a marketing ploy
Actually, there's a lot more to it! SRI starts with the same evaluation criteria used in traditional investing and then incorporates an extra-financial analysis to select and manage stock market investments.
• E for Environmental
• S for Social
• G for Governance
An SRI portfolio is made up of companies that strive to improve their environmental, social and governance practices.
Myth 4: SRI is just a passing trend
Far from it! It's a practice that dates back to the 18th century. Back then, religious groups wanted to avoid investing in activities they felt weren't good for people.
Later, the Vietnam War and apartheid made U.S. investors think twice about where they were putting their money.
Environmental disasters like the 1989 Exxon Valdez spill made headlines around the world--and also got investors thinking.
More recently, institutional investors (e.g., pension plans, unions, religious groups) in the 1990s and 2000s began adopting socially responsible investing policies and the practice became defined as "the inclusion of environmental, social, and governance (ESG) considerations in the selection and management of investments."1
Today, thousands of the world's largest institutional investors practise socially responsible investing, which accounts for more than 10% of global assets. In Canada, SRI represents 20% of assets.
Myth 5: SRI is still a pretty small, underdeveloped market
Every 2 years the Global Sustainable Investment Alliance publishes this high-level review of socially responsible investing across 7 regions:
- United States
- Australia and New Zealand
- Asia (excluding Japan)
In 2006, the United Nations launched the Principles for Responsible Investment (PRI) Initiative to make it easier for major investors to collaborate on SRI practices.
In 2014, the PRI Initiative had more than 1,260 signatories from 48 countries, representing US$45 trillion in assets under management.