4 responsible investing myths debunked

 

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Are you looking for a way to balance your social and environmental concerns with your financial returns? Then responsible investing (RI) might be the right choice for you.

RI is a form of investing that considers environmental, social and governance (ESG) issues while still focusing on financial returns for the investor. It uses the same evaluation criteria as traditional investing, but also incorporates ESG criteria for selecting and managing investments.

Even though RI has been around for over 20 years, there are still myths out there. Let’s look at a few and try to separate fact from fiction.

Myth #1: Responsible investing means sacrificing returns

Fact: As an investor, you’re looking to grow your money. RI investors are no different.

Responsible investments perform just as well as traditional investments—and sometimes they do even better. In a recent analysis of 2,000 studies published since 1970, factoring in ESG criteria was shown to have a neutral or positive impact on returns in 90% of cases.1

Myth #2: RI is just a fad

Fact: The RI sector is continuing to experience rapid growth and now represents 50.6% of Canada’s investment industry, up from 37.8% in 2016.2 Assets in Canada being managed with RI strategies currently total more than $2 trillion.

With more and more Canadian investors turning to responsible investing, it doesn’t look like this so-called “fad” is going away anytime soon.

Myth #3: RI is an underdeveloped market

Fact: RI is a global movement. In 2006, the United Nations launched the Principles for Responsible Investment to encourage major investors to collaborate on RI practices.

Every 2 years, the Global Sustainable Investment Alliance publishes a Global Sustainable Investment Review, which looks at RI trends worldwide. The report looks at 8 regions: Europe, United States, Canada, Australia and New Zealand, Asia, Japan and Africa. According to the most recent report, the global RI market was worth US$22.9 trillion across all 8 regions as at December 31, 2015.

Myth #4: RI is for idealists

Fact: The very first responsible investors wanted to be true to their values and principles by not supporting repressive regimes that violated human rights.

As an investor, it’s important to choose opportunities that suit your investment horizon and risk profile. With RI, you can also choose to incorporate sustainability into your investment choices.

To learn more about how to power your portfolio with responsible investment:

Visit Let’s think RI or talk to your representative

Useful links

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1. Gunnar Friede, Timo Busch & Alexander Bassen (2015), ESG and Financial Performance: Aggregated Evidence from More than 2,000 Empirical Studies. Deutsche Asset & Wealth Management and Hamburg University.

2. Statistics from the 2018 Canadian RI Trends Report, by Responsible Investment Association External link. Opens in a new window.