When you invest your money, where does it go? Which companies benefit from your investments? And do you feel comfortable supporting those types of companies?
For some investors, this raises concerns about whether the companies they invest in align with their values.
If that sounds like you, you might be interested in Responsible Investing (RI).
Also known as socially responsible investing (SRI), it’s a way to ensure you can feel good about who benefits from your investments, and you can still generate returns as you would with traditional investments.
“You won’t only benefit from those returns, but you’ll also be proud that they came from companies you value,” explains Jessica Rivera, Financial Advisor at Cambrian and Aviso Wealth.
Socially responsible investing in Canada is gaining traction as more investors learn about the reputational and performance risks associated with non-ESG companies.
A recent study showed that in Canada, sustainable investment assets grew by 48% over 2 years.
We spoke with Jessica Rivera to clear up the most common misconceptions about Responsible Investing:
“RI is not only about being green—it’s also about supporting companies that operate in a socially responsible way,” says Jessica.
One of the ways portfolio managers measure Responsible Investing is by looking at ESG factors. Let’s break down what each letter in ESG stands for:
Portfolio managers will measure how sustainable a company’s operations are. They look at factors that can impact climate change, like:
This section considers how employees at the company are treated. For example:
The last part of ESG looks at how the company is governed.
“You want to make sure that the companies you’re a part owner of have responsible social governance. This helps ensure that your investment money is used properly,” says Jessica.
Portfolio managers ask questions like:
A company that meets all 3 ESG factors is not only more sustainable, but it’s also poised for long-term growth—and that means investment potential.
At Cambrian, we’ve partnered with NEI Investments to provide our members with access to Responsible Investing. Learn more about NEI’s Responsible Investing Policy.
One of the main concerns that investors have about RI is that they might be sacrificing potential returns.
So, does investment performance suffer with Responsible Investing?
“Not at all,” says Jessica. “RI isn’t about compromising returns for social responsibility. It’s a way to make positive change in the world, help the next generation, and feel good that your returns aren’t generated from mistreated employees or fossil fuels.”
“Not only is RI good for your pocket, but you can trust that your money isn’t being used for something that doesn’t align with your values.”
“With traditional investing, the objective is focused on generating revenue and maximizing returns,” says Jessica.
“RI aims to generate financial returns and responsible investment outcomes. It’s about making investment decisions that align with your values and sustainability goals.”
Another difference is that with traditional investments, ESG factors are not considered. Through a careful screening process, RI helps reduce reputational risks.
“A company may perform well on paper, but what if they later end up in the news for how their employees are treated?” asks Jessica.
You may be wondering if your investment approach is having an impact. How do you measure the effectiveness of Responsible Investing?
“When you invest through our partner NEI Investments, your portfolio manager ensures that companies you’re investing in meet ESG factors, key metrics, and third-party verifications,” explains Jessica.
“You can feel confident as an investor that the returns you’re earning are making a positive change in the world.”
Jessica responds, “I wouldn’t say so. There are plenty of companies getting into RI, which means your options are well-diversified.”
To learn more about the benefits of investment diversification and how it reduces risk in your portfolio, check out our blog on How To Navigate Market Volatility.
You might think that with more screening processes and active management, RI comes with higher fees. But this, too, is another misconception about Responsible Investing.
“Whenever you invest your money, there are always fees associated with it,” says Jessica. “But compared to traditional investing, you won’t pay higher fees for RI.”
Now that you know what RI is, you’re probably wondering exactly how to invest responsibly.
At Cambrian, we provide access to Responsible Investing through our partner NEI Investments.
“When you meet with an advisor, we’ll get to know you; we’ll learn your values and what’s important to you. Then, we can provide investment advice that aligns with those values,” says Jessica.
Whether you’re brand-new to investing or you’d like to talk about your options, our Credential Asset Management Advisors at Cambrian are here to help. Book a meeting to start investing responsibly today!
Disclaimer
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc.
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