People on the North Shore, like other Canadians, are searching for ways to live better lives and ways to ensure their children continue to enjoy all the earth has to offer. 

The concept of socially responsible investing (SRI) has undergone dramatic change since it emerged in Canada in the late 1980s. Most of the funds back then only screened for sectors they would like to avoid, such as tobacco, oil and gambling, etc. The modern SRI funds now also take into account positive screening such as integration of environmental issues, worker rights and community investing. In a nutshell, it is now important to review both the positives and negatives of a company’s business in order to decide if it is “socially responsible” or not.

Ethical funds are mutual funds that invest only in companies that have “ethical” or “socially responsible” standards. Many investors would not have the time to distinguish whether a company is “ethical” or not, so it is important for individuals to use one of the many funds now available in Canada. 
Everyone likes to see good returns on their investments but few would like to see it at the expense of social responsibility. This is where ethical funds emerge. They believe that you should feel good about what your money is doing. Ethical funds usually invest in companies and economies that meet ethical principles.
Among examples of important issues that an ethical fund would screen for when investing for its portfolio would be whether companies:
•         encourage progressive industrial and employee relations;
•         support equal opportunity and non-discriminatory practices;
•         derive a major part of their income from non-tobacco related products;
•         provide products or services for civilian, non-military purposes;
•         derive their income from non-nuclear forms of energy; and/or
•         are committed to environmentally conscious practices.

All ethical fund companies will have different principals they follow when deciding whether a stock belongs in their portfolio. So before you invest in an ethical fund, you must decide what issues are most important to you. You need to decide what investments are off limit. Does tobacco irritate you? Do heavy polluters that contribute to greenhouse gasses offend you?

What about the values of a company? Is it important to you that you invest in companies that treat employees fairly? Or companies that contribute a large percentage of profits to charities and community organizations? Once you know what is important to you then you will be able to inform your investment advisor and they can do the homework for you in searching for the best ethical mutual fund.

Ethical Funds and Inhance are just two of many mutual fund companies that employ the concepts of socially responsible investing. Most studies suggest that returns from SRI funds are relatively similar to their non-SRI counterparts. 

However, the main reason for investing in SRI funds is for investors to feel comfortable in the knowledge that their money is being put to work in a socially responsible manner. So don’t expect huge returns but maybe sleep a little better at night!

I recommend speaking to an investment advisor about the various fund companies before deciding which ethical fund is best for you and your portfolio.

Lori Pinkowski is a senior investment advisor at Canaccord Capital. She can answer questions or provide a portfolio review. 604-643-7006  lori_pinkowski@canaccord.com  www.pinkowski.ca.

Copyright North Shore Magazine Issue Aug - Sep 08