Personal Investor: Holidays ring in reminder of ethical investing
Investment decisions tend to be cold and sometimes cruel, but there are ways to generate returns, keep your portfolio diversified, and still be true to your ethics.
A wide range of socially responsible investments (SRI) are available through mutual and exchange traded funds that suit the values of individual investors. The most common SRI strategies avoid investments involved in tobacco, weapons, alcohol, gambling, pornography, environmental damage or oppressive regimes. Funds are also available that reflect specific religious beliefs such as Islamic funds.
Most fund providers offer SRI funds. When it comes to performance there is no proven correlation between ethical investments and the broader markets, but it stands to reason that having fewer options means fewer opportunities.
Many SRIs are sub-advised by a Toronto-based research firm called Jantzi-Sustainalytics. Jantzi works with fund providers or pension plans to provide a screening process in line with their wishes. Jantzi also offers the 60-company Jantzi Social Index as an SRI-screened version of the S&P/TSX 60 index, considering a wide array of social criteria and excluding companies that have “significant involvement in nuclear power, tobacco and weapons-related contracting.”
The ETF that tracks the Jantzi Social Index (XEN.TO) has returned 21 per cent over the past five years – even after you strip out the 0.55 per cent management expense ratio.
Over the same period the correlating TSX 60 Index, which does not include dividends, returned 17 per cent.
Investors with more specific ethical concerns should speak with their investment advisors. Most firms provide a form you can fill out with specific instructions.