Investing can seem like a questionable endeavour if your only exposure to it is through Hollywood and the headlines. It’s mostly just for white dudes making deals on the golf course, right? And if you want to earn a decent return on your savings, you’ll have to use them to subsidize child labour, build oil pipelines, and jack up some CEO’s Christmas bonus?
Actually, there are lots of ways for 99 percenters to use their money to benefit both society and their savings accounts. Social responsible investing — aka ethical investing — prioritizes companies that aren’t actively trying to dismantle society for a profit. It’s become a booming trend in recent years, as everyone gets more plugged in to current events and start to question where their money’s going.
“We live in the digital age, which has helped to put a human face on capitalism,” explains Dustyn Lanz, Senior Director, Communications and Member Affairs at Responsible Investing Canada. “When a factory collapses in Bangladesh, or when an oil spill ravages the Gulf of Mexico, we can see the very real consequences for people and the planet.”
This kind of values-led investing is proving especially popular with young people, since we’re generally a lot more progressive and tech-savvy than our parents. A 2015 Morgan Stanley survey found that 84 percent of millennials were interested in this kind of investing, compared to just 66 percent of our parents.
So can your TFSA really be the change you want to see in the world? Read on, compassionate capitalist.
“Socially responsible” is kind of a hard thing to define, right?
Investors and fund managers look for three things when they’re determining whether a company is socially responsible, or “not evil:”
1. Environmental track record. If one of its tankers is currently coating baby seals in oil off of the Alaskan coast, it won’t be making the cut.
2. Social policy. This includes everything from the health and safety of its workers, the company’s relationship with its unions, and its track record on human rights issues.
3. Corporate governance. i.e, does the company’s board of directors have more white dudes named “Michael” than women or POC combined?
Of course, applying this criteria can still lead to some grey areas. Like, what if your favourite eco-friendly manufacturer’s been busted for denying its workers overtime? And if fossil fuel companies are moving into renewable energy, isn’t supporting their efforts a smart move? Before you get started, map out the moves (and compromises) you’re comfortable making.
Can your $700 really change the world?
When you hear about the billions of dollars pouring into socially irresponsible companies, it’s easy to feel like directing your barista tips elsewhere won’t make much of a difference. But investing is kind of like voting. If enough people decide their voice doesn’t count, we’ll get stuck with bad governments and predatory companies calling the shots.
“Collectively, we as Canadians have billions of dollars in RRSPs, pensions and other investment accounts.” says Adam Jagelewski, Director of the MaRS Centre for Impact Investing. “If even a small percentage of that were redirected towards responsible investments it would be a massive flow of money into causes that people care about.”
So the lesson here is, if you’re looking to make the switch to responsible investing, make sure you tweet about it afterwards so everyone gets inspired.
Can you make any money off it?
Yeah, supporting good causes is nice, but you’ve got buying a house and seeing Machu Picchu on your bucket list. Isn’t that also kind of a good cause?
Well, there’s a growing body of evidence showing that responsible investments perform just as well, if not better, than traditional investments. A 2015 study from Carleton University found that responsible Canadian equity funds outperformed traditional funds 63 percent of the time, while also showing lower levels of risk and volatility.
Surprise surprise, responsible companies tend to be responsibly run. “Those corporate governance controversies and scandals we see in the news can hurt your investment portfolio,” says Lanz. “After Volkswagen admitted to systematically falsifying its vehicles’ environmental performance last year, its share price plummeted by 60 percent.”
So how do you actually do it?
Start simple. If you have an RRSP with a bank, ask what responsible investment funds they offer. Some have funds focused around specific issues, like BMO’s Women in Leadership mutual fund. Others tackle things like food or water security, or they won’t invest in fossil fuels. If you’re handling your money by yourself, look for the B Corp mark. It’s a bit like the Fair Trade symbol, and means a company has been independently certified as having high standards of social and environmental responsibility.
Only got $1,000 or $2,000 to spare? You can still do good. MaRS runs an online platform called SVX.ca, which connects people looking to make small investments with companies doing good work on social or environmental causes. There are also plenty of sites offering micro-loans and community bonds on the local level.
You could also put your money exactly where you don’t want it. Bear with me here. Jesse Martyn, a Vancouver-based financial planner specializing in ethical investing, raises the example of Tzeporah Berman, an oilsands activist who’s been linked with Steve Williams, CEO of Suncor. “This untraditional dialogue raised eyebrows,” says Martyn, “but it offered a way for these usually divergent thinkers to find common ground to move forward.”
“And if you don’t make enough to get a meeting with the CEO, hey, just start trolling. Buy a few shares in a company you dislike, then show up at their Annual General Meeting and ask the tough questions.”