Responsible Investing

Many investors have strong morals or values that prioritize environmental or other social concerns such as human rights and fair and equitable corporate practices. In some instances, investors may want to apply these values in a consistent manner to their investment choices too.

Responsible Investing involves adding environmental, social, and governance (ESG) considerations when selecting securities (i.e. equities or bonds) that make up investment portfolios.

One of the most common methods in responsible investing is to exclude sectors of activity or companies whose activities are deemed harmful to humans, such as the production of armaments or fossil fuel. To help you make your selection, you can read the social and environmental responsibility reports published by companies, as they will help you assess their practices and track their progress.

Another common way to select investments is examining companies' practices, whether it's their management of water or waste, the working conditions of their employees, or the diversity within their board of directors. Examples include investments where the underlying companies prioritize ESG factors.

Environmental

• Biodiversity – The preservation of wetlands or guarding against pollution risks of waterways from industrial discharges. Respecting biodiversity helps protect the ecosystems essential for food security and the health of millions of people.
• Waste management – Waste management involves the collection, transport, recycling, and treatment of residues from various sources, including industrial activity. Proper waste management contributes to the reduction of greenhouse gas (GHG) emissions but can also save costs for companies that minimize the impact of their activities.

Social

• Indigenous Rights – The United Nations has adopted the Free, Prior and Informed Consent of Indigenous Peoples, which states that "the human rights and self-determined priorities of Indigenous peoples are integrated into decisions that may affect them or their lands, territories, and resources." In Canada, governments and companies are required to comply with the Act on the United Nations Declaration on the Rights of Indigenous Peoples, passed in 2021.
• Child Labor – Ensures that companies held in the portfolio have procurement processes in place that respect human rights, and suppliers whose practices exclude forced labor and child labor.

Governance

• Executive Compensation - A significant portion of executive compensation consists of incentive payments that are added to their base salary. The substantial increase in overall compensation for top executives, when compared to that of employees, can impact on the company's performance, as well as its ability to implement its growth strategy.
• Diversity of Boards of Directors - Analyzing this factor allows for a better evaluation of a company's governance. Gender parity and diversity within the boards of directors and senior management of companies contribute to their success through the addition of diverse perspectives and more effective decision-making.

It is also possible to influence the companies by exercising your shareholder voting rights and engage in dialogues which can help them adopt better environmental, social, or governance practices.

Responsible Investing Products

Besides investing in specific companies (stocks and bonds), there also are several other types of investments that may integrate ESG analysis:

1. Mutual Funds
2. Exchange-Traded Funds (ETFs)
3. Guaranteed Investment Certificates (GICs)

Responsible investment solutions must be framed by a policy on responsible investment (RI). This policy defines the strategies used in the management of responsible investment products, the priorities of the manager and/or manufacturer, as well as the process for monitoring the outcomes generated by RI.

Given the vast range of Responsible Investing products available, it is important to first know what kind of an investor you are, in order to make a choice that also aligns your interests with your goals. You can begin by completing our Investor Questionnaire, which will consider the time frame for which your money will be invested and your tolerance for market fluctuations. Once you know yourself better, you can begin to assess the various RI solutions.

If you are an investor who prefers to make your own investment choices, you can select stocks and bonds that align with your priorities and interests.

An investment advisor can also guide you in choosing the type of ESG investment that best meets your financial goals.