|
ELFEC practises Responsible Investment. What does that mean?
In years past you may have heard of ethical investing or socially responsible investing. Responsible Investment (RI) is the term preferred today in most circles, but it stands for pretty much the same thing. The Responsible Investment Association (RIA) defines RI as “the integration of environmental, social and governance factors (ESG) into the selection and management of investments.”
RI is generally regarded as having four components:
- Using ESG factors as criteria in building investment portfolios, often known as screening;
- Voting proxies at shareholder meetings;
- Engaging with companies, through letter-writing and meetings, in an effort to encourage better business practices;
- Investing in organizations that produce environmental and social benefits as well as financial returns (sometimes known as the triple bottom line).
ELFEC currently uses the first three of those strategies. Because of our relatively small size we leverage partnerships with our investment manager and the Shareholder Association for Research and Education (SHARE) to “punch above our weight”. Acting in concert with other like-minded institutional investors gives us greater clout than we could ever have on our own.
There is a long-standing belief among investors and managers that practising RI inevitably means accepting lower financial returns. This turns out to be a myth that has been contradicted by research many times in recent years. To quote from the RIA’s 2015 report on RI trends in Canada:
Responsible investors have long known that the integration of ESG factors into the selection and management of investments can provide superior risk-adjusted returns and positive societal impact. What’s changed in the past decade is that it’s being recognized as a mainstream function of good investment practice, resulting in better, more informed investment decisions.
It is relatively easy and inexpensive for an institutional investor like ELFEC to find and employ the services of a competent RI investment management firm. It is not as simple or as cheap for an individual investor. ELFEC manages funds contributed as a charitable donation by individuals and families, and we manage them according to our RI principles. Unfortunately, as a charitable foundation, we are not allowed to manage people’s retirement savings.
In future issues of this newsletter we will explore the options available to individuals who want their personal assets to be invested in a responsible manner.
To learn more about Responsible Investment, contact Jeff Pym at 1-888-308-9461 or jpym@elfec.ca.
|
