Will socially responsible investing ever really catch on? I asked that question when I conducted a study for Vancity Credit Union on the future of socially responsible investing (SRI) five years ago. Today, the answer is ‘thumbs up’. Pretty well every prediction from that study played out, particularly the mainstreaming of SRI.  Check out these numbers:

  • $200 trillion – the estimated size of global capital markets.
  • 800 – the number of asset managers around the world who have signed on to the UN Principles for Responsible Investment, which commits them to take environmental, social and governance (ESG) factors into their investment decisions.
  • $22 trillion – the assets under their management.
  • 530 – the number of institutional investors who have signed on to the Carbon Disclosure Project,  to increase disclosure on how their investments manage carbon and energy use.
  • $64 trillion – the assets under their management.

From my vantage point, that’s great progress. Over 10% of the global capital market is now aligned with ESG factors.

So what can we do to continue to catalyze this progress?

Malcolm Gladwell says, “The theory of the tipping point requires that we reframe how we think about the world.”

So we’re on the right track.  A big driver of this capital markets shift is a reframed definition of socially responsible investing.

More than twenty years ago as a Vancity Credit Union board member, I was a founding trustee of Ethical Funds Inc., the first family of socially responsible mutual funds in Canada. Back then SRI was all about values-based investing: no nuclear, no tobacco, no weapons, etc.

Today, SRI is more broadly defined as the integration of environmental, social and governance factors into investment decisions.  It may or may not include sector exclusions on the basis of social or environmental factors.  It often includes shareholder engagement where asset managers dialogue with their investee companies to seek improved ESG performance.  It can also include targeted investments in community-based initiatives or clean technology.

SRI’s financial performance also gets a ‘thumbs up’.  Investments which take social and environmental factors into account can do as well as, or even outperform, traditional investments. For example:

The Jantzi Social Index (JSI), which measures a basket of SRI investments, outperformed the S&P/TSX over a decade. Since its inception on January 1, 2000 through January 31, 2010, the JSI achieved an annualized return of 5.01%, while the S&P/TSX Composite and the S&P/TSX 60 had annualized returns of 4.98% and 4.83% respectively.

A review of 160 socially responsible mutual funds in US in 2009 found that the majority of the funds (65%) outperformed their benchmarks in 2009, most by significant margins.  These SRI funds topped benchmarks across nearly all asset classes, including balanced, large cap, small cap, and global funds, as well as bonds.

With this progress, I wonder what it will take to reach the tipping point.

A good strategy is to introduce SRI principles to new sectors such as foundations; to encourage them to reframe how they think about the power of their investments. Recently I worked with Community Foundations of Canada (CFC) and Philanthropic Foundations Canada, to help inform, train and build the capacity of foundations to consider SRI in their investment policies.

One outcome of this effort is the launch of the first SRI online resource for foundations in Canada, sponsored by CFC.  I also put together a how-to tool for asset owners who want to hire an SRI oriented fund manager, Responsible Investment Questions for Fund Managers, also funded by CFC.

Growing foundation interest in Canada has the potential to swing $34 billion to SRI principles. If foundations around the world reframe their investment principles, we might just reach that magical tipping point.


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Will socially responsible investing ever really catch on? I asked that question when I conducted a study for Vancity Credit Union on the future of socially responsible investing (SRI) five years ago. Today, the answer is ‘thumbs up’. Pretty well every prediction from that study played out, particularly the mainstreaming of SRI.
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