What is socially responsible investing (SRI)?

- Despite growing interest in socially responsible investing, identifying ethical choices in the investment universe is difficult.

- A number of major investment firms are committed to offering socially responsible investments. Their size and expertise enable these firms to offer attractive solutions that are worthy of your attention.

- Several resources, such as the Responsible Investment Association (RIA) of Canada, strongly promote ethical investing and are a useful reference source.

Definition of SRI

According to a widely accepted definition, “SRI is a type of investment that systematically takes into account environmental, social and governance criteria (often referred to as ESG criteria) in addition to financial criteria.”

The Association Française de la Gestion Financière and the Forum pour l'Investissement Responsable echo this definition of SRI in their Transparency Code: “Application of the principles of sustainable development to investment. An approach that systematically takes into account three dimensions – environment, society and governance (ESG) – in addition to usual financial criteria. Implementation can take a number of forms based on positive selection, exclusion, or both, in some cases including dialogue with issuers.”

A European definition is provided in an opinion of the European Economic and Social Committee (EESC, Opinion of the European Economic and Social Committee on “Socially responsible financial products” (2011/C 21/06) own-initiative opinion, point 3.1.1): “This covers savings products (current accounts, high interest accounts, savings deposits, structured deposits), investment products (collective investment undertakings: mutual funds and unit trusts; pensions and insurance, pension funds and plans; retirement plans, financial or unit linked life assurance, thematic funds), credit finance instruments and financial support mechanisms (micro-credits, revolving funds, mutual guarantee funds and risk capital), which include built-in environmental, social and good governance criteria without, under any circumstances, overlooking the necessary goals of risk and financial profitability.”

Criteria for SRI

Responsible investing considers three levels of risk:

1. Environmental risk: Do the company’s operations have a negative impact on air, land or water? We examine the impact on biodiversity, land use, emissions, climate change and water use.

2. Social risk: Does the company respect human rights and workers’ safety?

3. Governance risk: How is the company run? We look at factors such as the diversity and independence of directors and executive compensation.

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building your SRI portfolio

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