SRI trend growing just in time for RRSP deadline

“What a lot of advisors don’t realize is that you don’t have to have a 100% socially responsible investing [SRI] portfolio for a client,” says Dermot Foley, vice-president of strategic analysis for Inhance Investments Management, a fund company based out of Vancouver. “Clients might be quite content with certain holdings but may want some of their assets to reflect their changing concerns.”

Given the current volatility in the market, many investors are beginning to look around for investment vehicles that can withstand the downturn. Foley believes those investments can be found in SRI funds.

“Primarily, we do positive screening and look at the exposure companies have to products that are unsustainable — such as tobacco,” says Foley. “The companies we invest in [then] are of higher quality and are able to weather volatility storms a little better.”

Foley describes how Inhance fund managers analyze research, company particulars and the market to determine the most suitable selection for each particular fund. For example, Inhance managers examine how companies address certain environmental conditions, such as renewable energy or global warming. “Do they have practices and policies that will help prepare the company for global warming? The issue of global warming is very important to us as we believe it will have a dramatic effect on the economy and on companies. We want to be pretty certain they have the talent and the brains to address this issue.”

Foley suggests that “with the type of action we are seeing in the market nowadays, nobody is immune. It’s really just a question of how much volatility. At the end of the day, we are looking for high-quality businesses to invest in; these businesses have the reserves and the foresight to actually plan for market cycles, withstand ups and downs, and do all of this in a sustainable fashion.”

Another benefit of SRI funds, says Ross Campbell, an Assante advisor based out of Whitby, Ont., is that these funds tend to be more consistent. “They tend to be more pure,” he says. “If they are mandated to be a U.S. fund, they are a U.S. fund; if they are mandated to be a Canadian fund, then they are a Canadian fund. As an advisor, this really helps when doing asset allocation and ensuring diversification — two aspects of investing that are required if investors want to withstand volatile markets.”

Betty-Anne Howard, a CFP out of Kingston, Ont., who specializes in SRI funds, says that this RRSP season more and more clients are asking about options.

“A lot of people think that the investment world is all about making money, but many of us make decisions about where we spend our money,” says Howard. “For example, what food we buy determines whether or not we support local farmers or organic products. The thing is, we all make these decisions on a daily basis. I’m trying to help people make the link between how we spend money and how we invest money.”

According to Statistics Canada, 6.1 million tax filers, or 8% of eligible tax filers, contributed to an RRSP in 2006. Total contributions to RRSPs topped out at $30.6 billion in 2005, with a national median contribution of slightly more than $2,630. (The maximum RRSP contribution limit is based on 18% of the previous tax year’s earned income, to a fixed maximum, less any pension adjustment, plus any unused room carried forward.)

“There is a bigger picture,” says Howard. “Money managers are coming on board. Even large pension plans in Canada are signing on. This sets the stage in terms of direction of growth. In fact, the manager for a B.C. pension fund just told me that she is going into SRIs ‘because this is the place to make money.’ Allocating tons of money to SRIs just makes sense in terms of diversification and growth. It is about making money, and more.”

Filed by Romana King, Advisor.ca, Romana.King@advisor.rogers.com

(02/05/08)