Eco-investing adds values to bottom line

It’s possible to eat a 100-mile diet, shop local, buy organic and get a carbon footprint smaller than the parking space of a hybrid car. But is it possible to make money in investments without harming the planet or violating your ethics?

It is. Socially responsible investing is capitalism with an environmental twist, and a rising trend among beginner and experienced investors alike. Also called ethical investing, it’s about matching investments with values, and putting your money to work for the good of society and the planet.

“Clients come to us because there’s this gaping hole in the congruence of their investments and the rest of the way they live their lives,” says Frank Arnold, a senior investment advisor at The Pinch Group, a Victoria-based investment firm that does socially responsible investments. “We see ourselves as financial managers first and foremost, and then overlay on top of that people’s ethics to construct a portfolio.”

The goal of a traditional investment is to make money, and socially responsible investments are no different. But a socially responsible investment also considers what the company is putting back into the world, and an investment’s environmental, social and economic impact. For example, it’s possible to have a diversified portfolio and not include tarsands assets, says Stephen Whipp of Stephen Whipp Financial, an investment manager who specializes in socially responsible investments.

“My clients will ask the question ‘How is that company behaving from an environmental and social perspective?’, and ‘Are they profitable?,’ “ Whipp says. “The great red herring is that investing with your values or ethical investing won’t make you money. That’s a lie. Anyone who believes that has been sold a bill of goods by people who don’t understand what socially responsible or ethical investing is about.”

Whipp has worked with socially responsible investments since the 1970s. He says clients are interested in how a company takes care of its staff, sustainability measures (such as water and energy conservation or environmental remediation) as well as straight-up green investments, such as up-and-coming green energy companies.

Bill Finley of Hemp & Company, an organic clothing retailer, has made socially responsible investments since he first met Whipp at a Values-Based Business Network meeting.

“I like to shop with all of my ethics intact, and this is just one more shopping trip for me, like buying organic produce,” Finley says. “So when I chose to invest, this was the way I wanted to go. It’s environmental, and social.”

He was a little worried about security at first, but after the recent financial crises, his socially responsible investments recovered sooner than his traditional investments.

“There’s a thought out there … ‘If I do that, am I going to make any money, or am I just donating it?,’ “ Finley says. “The answer is no. These are real companies, but they’re filtered, so we know we’re not selling tobacco to children, and supporting industries we don’t like.”

One socially responsible investment is the TD Global Sustainable Mutual Fund, launched in 2007. Two-thirds of the fund is across all sectors, larger companies that are more traditional but have ethical practices, while the remaining one-third is invested in clean technology, says Thomas George, the fund manager. The fund is based on a less-for-more principle: There are limited resources remaining (fuel, materials), and industry must get more efficient to make a profit.

“The core is what we define as sustainability leaders … global best-in-class companies in regards to social, environmental and corporate governance factors,” he says. “We look for companies that are profitable today, or have a path to profitability. We feel that by doing that … what you get is lower volatility. It’s about getting maximum exposure to green with the lowest possible risk.”

The fund also has a dedicated social governance analyst, and runs its own matrix to score the funds for ethics as well. The TD Global fund doesn’t use a negative-screen approach, where it cuts out companies based on industry, like some other funds might. This leaves open the possibility of investment in industries that some might disagree with. In the end, it’s up to the investor to decide what to purchase.

Buying into a socially responsible investment fund isn’t a cookie-cutter solution to keep your ethics intact. The funds are managed, usually by a team, who choose stocks and bonds according to a set of values, which may not match yours, Whipp says.

For example, some funds invest in nuclear power, believing it to be a solution to future energy crises. Other funds invest in super-polluters to encourage shareholder action, in an effort to make the company change its ways or to lobby industry for better environmental standards.

Most funds start by picking companies from the Jantzi Social Index, a collection of 60 companies based on their social and environmental practices, or the Dow Jones Sustainability Index, a far larger spectrum that can be filtered down to a more manageable group.

Shareholder engagement is a big part of socially responsible investing. Meritas, an investment firm, runs a fund based on the Jantzi index. Among the fund’s top holdings are Suncor Energy and EnCana. Meritas plans to encourage the companies it owns shares in to be better social performers. Meritas recently led a say-on-pay campaign, which gives shareholders a say on executive salaries. Ten companies it targeted have agreed to have say-on-pay votes starting next year. Meritas funds also don’t include military and weapons contractors, alcohol and tobacco, pornography and gambling, or nuclear power.

Determining the values of a client is important. Whipp has a questionnaire with more than 40 questions he uses as a starting point, to help filter the funds available to his clients.

“What people need to know is what the values are they’re using. Don’t use the values of the mutual fund to define your own. Define your own, then go from there. It tells you what you’re willing to accept, and helps you build your checklist. Are you willing to accept an investment in Suncor Energy, knowing that the shares are going to be used to push Suncor into reducing its carbon emissions and reducing water use? Yes or no? No, fine. Don’t invest in the SRI product that has Suncor to try to do that.”

Read Steve’s blog at

Credit: Steve Carey; Times Colonist


Photo: Rob Struthers, Times Colonist /; Caption:

Word count: 1060

Copyright Southam Publications Inc. May 23, 2010

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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.

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Stephen Whipp is a member of the Responsible Investment Association