2013- Still Learning How To Ride a Bike


Ever wonder how one goes about choosing an “ethical” or “responsible” investment”? What is an “responsible” investment anyway?

You could ask a similar question about the food we buy: what are the criteria that are used,? An investment is really not different.
I am sure though if you polled our clients you would likely get a wide range of criteria. In fact, it may be a very interesting debate if you asked that question of all of them at the same time. Not sure I would want to be in that room- it might get a bit heated but it might fun.

While we don’t have the time to go into great detail (and of course we don’t want to reveal all our trade secrets) there are a couple of questions that you should ask yourself. Just like you do when grocery shopping, there are certain parameters that you can use:

• Why am I investing? Why am I grocery shopping now?
• Is this for the log term or the short term? When do I plan to grocery shop again?
• Do I need income and if so how much income? Do I need vegetables and if yes how much?
• Do I want it to grow and by how much? Do I need meat or fish and if yes how much?
• How long do I need this investment to last once I start using it during retirement? How many meals can I get out of grocery cart of food?
• Is this investment my only source of retirement income? What other food do I have in the cupboards that will supplement what I am buying today?
• How would I feel if the market took another dive like in 2008? How would I feel about buying close to stale dated food?
• Do the present economic situations make me nervous about investing? Does the lack of GMO labelling make me nervous about buying certain food?
• What would happen to my retirement plans if my portfolio were to drop by 20 per cent and take three or more years to recover? What would happen to my eating habits if food prices increased by 20 per cent?

Now you no doubt have noticed that these nine questions have nothing to do yet with choosing a “responsible” investment. That is true; however these are important questions that you need to answer no matter how you are investing. What Annette and I do is different because we begin by asking a new set of questions. These questions will then begin to identify other investment criteria, such as:

• Are you concerned about climate change?
• Are you interested in investing in companies who are implementing a “real” plan to reduce carbon emissions?
• Do you believe that we need to move towards using less oil in our day to day products and less in our energy consumption?
• Are you concerned that many of the products sold by big name brand retailers are either made or contain elements that are made by children working in forced labour situations?
• Given a choice, do you choose organic fruit and vegetables?
• Do you believe corporations need to be pushed to do a better job of reducing their environmental footprint and increasing their positive community impact?

I think you get the picture. The answers to these and other questions then allow you or Annette and I to then develop an investment screen that can be used to sift through the myriad of investments in the marketplace. One last thing: because corporations are managed by people there are no “perfect” corporations. They all have warts, some larger than others. We see our job as helping investors find the best of the best while still meeting their pure financial goals.

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So now that you have answered these and other questions, where does one invest?

We know the last few years have been like learning to ride a bicycle- wobbly at best, skinned knees for sure and maybe even some bloodied knuckles as we hung on too tightly to the handle-bars. The markets have showed their nervousness each time there was a hint of bad news out of Europe or the U.S. We saw the U.S. provide better returns than Canadian stock markets despite its wobbly ride. I believe 2013 will be much the same as removing the training wheels. There will likely be some gleeful rides with the occasional fall. I’m not convinced that the volatility is going to all of a sudden disappear. There will likely be longer periods between dips enticing some to drastically change the asset allocation of their portfolio only to be disappointed when the rally stalls or the market takes another dip. Here are a few tips that you may want to consider:

• “Take the right level of risk for your situation”;it’s a great mantra, especially in times like these
• Don’t be mesmerized by the shinny bobbles, there are always new investments that become the “darling”
• Are you well diversified or too diversified?
• Where are you going and how fast do you need to get there?
• Ignore the noise, the Kevin O’Leary’s of the world, stick with your plan
• Lastly, take the time and make the effort to discuss your plan with us or your advisor

While many analysts are cautiously optimistic about the outlook of stocks for 2013 there is also a consensus that there will be no easy resolution to the developed world’s debt or slowed economic growth. There seems to be almost universal agreement that any resolution will take years. I suggest planning for a more reasonable level of growth, not the “boom” days of past but something that can be managed, so that the goal of financial and environmental sustainability is achievable.

Growth in itself should not be the silver bullet and it could be the bullet that eventually kills the golden goose.

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Speaking of golden geese, a few universities will likely start feeling the heat, as not only their endowment funds but their golden pensions’ investments are about to questioned.

While many universities, including institutions here in Victoria are seemingly walking the sustainability walk not all is well. In the past decade many universities have branded themselves as sustainability gurus by erecting buildings with relatively low carbon footprints and carrying out natural garden plantings and focusing on the large student appetites for sustainability courses, including business schools. A group of students with the help of some environmental organizations are questioning why universities like Victoria continue to shun responsible investing practices.

UVic’s campus newspaper, The Martlett, wrote,“UVic’s endowment funds total around $270 million currently, and the market value of its pension fund investments (which comprise a balanced fund and defined retirement benefit fund) totalled around $678 million at the end of last year. According to Common Energy, both the endowment and pension funds were invested in corporations engaged in controversial practices, such as human rights abuses and fossil fuel development.” It is noted, however, that earlier this summer The University of Victoria Foundation’s Board of Trustees passed a resolution binding their fund manager to consider Environmental, Social and Governance (ESG) factors in making decisions about the use of funds. The much larger pension fund, however, has not received similar treatment.

It seems to me that it may be time to legislate Responsible Investment practices before one of these pension funds or endowments are challenged for their lack of due diligence. It is time all shareholders take responsibility for the actions of the companies they hold shares of. Besides they may find out, as millions of other investors have that they will get improved returns.

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Lastly, the Social Investment Organization has a new website that some may find of interest. It can be found at www.socialinvestment.ca


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The information in this website was obtained from sources believed to be reliable, however, we cannot guarantee that the information is accurate or complete. The information provided is a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities.

Leede Jones Gable Inc. is a
Member of IIROC and the Canadian Investor Protection Fund
Stephen Whipp is a member of the Responsible Investment Association