SRI investors want similar returns on investment

Canadians are increasingly interested in socially responsible investing, but not at the cost of capital gains, according to a study commissioned by Standard Life.

An Ipsos Reid survey on attitudes toward socially responsible investing found that Canadians are open to SRI, provided their investment returns are similar to other investment choices.

“This research is saying that Canadians will carefully consider socially responsible investments, provided the returns are there,” says Anna del Balso, associate vice-president, research and intelligence of Standard Life. “SRIs can become a much more important part of investing for both investors and advisors alike, but first investors must have more information and better accessibility to this type of investment.”

The study found that 54% of Canadians who have discussed socially responsible investments with their advisor raised the topic themselves.

It noted that 10% of Canadian investors have made a socially responsible investment, and that number increases to 13% among higher net worth Canadians with at least $200,000 in investable assets.

SRI is defined as investments in companies or funds that meet certain environmental, social and governance standards. According to the Social Investment Organization, a Canadian trade association for socially responsible investing, SRI mutual funds total $25.3 billion and represent around 4% of Canada’s retail mutual fund market.

Lack of awareness among Canadian investors remains one of the biggest hurdles for SRI achieving its true potential in Canada. The study showed that only 15% knew a lot or a fair bit about socially responsible investments. Four in ten investors (42%) reported they had never heard of SRI while 43% said they were aware of this type of investment, but knew little or nothing about them.

What comes as an even greater surprise is the finding that financial advisors also possess limited awareness and knowledge about this investment category.

The survey found that eight in ten advisors surveyed are either very satisfied (14%) or satisfied (68%) with the performance of SRIs under their management.

“Advisors who take the time to understand their clients’ environmental and social values and provide investment opportunities that align with those beliefs may achieve sales and reputational gains,” said del Balso.

In the U.S., alternative investment funds have found success by integrating environmental, social and governance (ESG) factors into their investment process. There are 375 such funds, with a combined AUM of $80.9 billion at the outset of 2011.

That asset base reflects almost 16% growth since the beginning of 2010, according to a report prepared for the U.S. SIF Foundation by the Center for Social Philanthropy at the Tellus Institute.

The alternative investment funds tracked in the report span the asset classes of private equity and venture capital funds, property investment funds and hedge funds, and they utilize a broad range of approaches to ESG criteria and themes.

“Alternative investments in sustainable and responsible investing are attracting a wide range of investors—high-net-worth families and individual ‘angel’ investors, mission-driven institutional investors such as philanthropic foundations, hospitals and faith-based institutions, and some of the largest and most prominent pension funds and private equity firms,” said Lisa Woll, CEO, U.S. SIF.

The growth of the SRI market is being supported by an ecosystem of investor networks and field-building organizations working to develop reliable metrics to evaluate the social and environmental returns of these funds, she added.