Investing in a Better World
Part One
By Hamish Tulloch, RBC Dominion Securities
With fair trade goods being prominently displayed on store shelves, Hollywood blockbusters raising awareness of the diamond trade and media covering climate change, Canadian investors are beginning to recognize how the activities of corporations influence our lives beyond supplying us with goods and services.
Financial advisors often caution their clients on the risks of allowing emotions to influence investment decisions. For example, allowing greed and panic to influence your investment decisions can have disastrous consequences.
Can your concerns for the environment, social issues, corporate governance and your community fit into a healthy investment portfolio? Socially responsible investing (SRI), sometimes referred to as ethical or sustainable investing, considers these kinds of issues in the decision-making process. As long as these criteria are considered in addition to, not instead of, the financial merits of an investment, then there is no reason to expect investment performance to suffer.
Some investors feel that corporations are not designed to be moral entities. The cynical among us may even feel that ethical decisions have no place in corporate boardrooms, and that the corporation’s only duty is to maximize profit for its shareholders. Implicit in this view, is the notion that being a good corporate citizen is bad for the bottom line. On that point, I have to emphatically disagree. In fact, there are many examples where the "profit at any cost approach" to doing business has actually been detrimental to corporate returns. A system that rewards corporations for polluting the environment, mistreating employees and misleading shareholders about its earnings, is one where the costs of bad behaviour never make it to the corporate balance sheet. As we gain awareness of the real costs of corporate misbehaviour, corporations are increasingly being required to pay these external costs of doing business. Part one of three
Next Issue: The Three General Kinds of Socially Responsible Investing
Hamish Tulloch is an Investment Advisor with RBC Dominion Securities. He is also a member of the Canadian Investor Protection Fund (CIPF). |
