Responsible Investing for Values Driven Investors

From adopting eco-friendly habits like recycling and reducing carbon emissions to advocating for workplace pay equity, Canadians are more committed than ever to building a more environmentally and socially equitable world. If you have money set aside for investing, but want your capital to support your personal values, responsible investments could be the perfect solution. It’s a way to invest your money meaningfully and generate impact beyond just financial returns.

What Exactly is Responsible Investing (RI)?

Responsible Investing (RI) involves selecting investments that seek to achieve strong financial returns while also creating a positive societal impact. This approach evaluates companies based on their effects on people, the planet, profit, and the way they manage their business. Whether you want to back firms tackling climate change, those that actively give back to their communities, or companies promoting ethical workplace behavior, there are diverse RI options available to align with your personal mission.

Understanding ESG: The Core of RI

Responsible investments are analyzed using three crucial factors: Environmental, Social, and Governance, collectively known as ESG. These criteria allow you to direct your money toward institutions that prioritize causes you care about. Ultimately, RI lets your money make a difference on multiple levels—from your personal wallet and the global environment to a company’s operations and your local community.

• Environment (E): If sustainability is important to you, you’ll look at a company’s carbon footprint or stance on air pollution. A thorough review helps you avoid investments in companies known for activities that don’t align with your values, such as excessive fossil fuel emissions.

• Social (S): This factor examines a company’s relationships with the people around them: consumers, suppliers, employees, and communities. It evaluates their response to social trends, labor standards, and commitment to things like workplace safety, equal opportunity for advancement, and community outreach.

• Governance (G): This refers to the systems of decision-making within an organization. It covers the allocation of rights and responsibilities among various levels, including the board of directors, managers, shareholders, and stakeholders. Governance also looks at a corporation’s core purpose and executive compensation practices.
  
  

Why RI Matters and How it Performed

The world faces many urgent challenges, from climate change to global food scarcity. Increasingly, Canadians are choosing to invest their hard-earned money in companies committed to finding innovative solutions to these social, environmental, and governance issues.

The COVID-19 pandemic, for example, highlighted the importance of RI. Companies that successfully navigated the crisis balanced their financial viability with maintaining employee safety. Canadian institutions that demonstrated concern for their workers by providing Personal Protective Equipment (PPE) or offering paid time off for quarantining essential staff are great examples of positive social practices. Similarly, many financial institutions adopted sustainable business practices, such as offering paperless banking statements to reduce their carbon footprint. By choosing services like e-billing, you cut down on paper waste while managing your finances—a true win-win. RI is creating new opportunities to build a better future through your portfolio.

The Financial Upside: Can RI Outperform?

When it comes to everyday life, most of us naturally support ethical businesses—from buying locally sourced produce to choosing eco-friendly cosmetic products. When it comes to investing, you might worry that supporting social causes will mean sacrificing financial results. Think again!

Responsible investments have consistently proven to perform just as well as, or even outperform, traditional investments. This makes them a highly desirable option for meeting your financial goals. Companies with a strong ESG framework often resonate deeply with responsible investors, making those investors more inclined to ride out market volatility. This loyalty can translate into more stable returns. You really can achieve competitive financial returns while making a positive difference.

How to Build a Responsible Investment Portfolio

Incorporating RI into your portfolio doesn’t have to be complicated. Once you define the values that matter most to you, you can start putting your money to work for social good.

1. Identify Your Core Causes What values are most important to you? Is it ethical corporate leadership, environmental preservation, or social justice? Write down a list of the causes you are most passionate about. This clarity will help you select the types of organizations and funds that truly reflect your values.

2. Research and Align Your Options After deciding to invest responsibly, the next step is choosing where to place your money. Take time to research organizations and funds to ensure they align with your values. Remember, you don’t have to do this alone! If you’re unsure where to start, consider consulting a financial advisor, especially one with a Responsible Investment Specialist designation. They can help you gain a deeper understanding of this investment type and select the most suitable options.

3. Start Small, Diversify, and Seek Advice As with any investing, remember the importance of diversification—don't put all your eggs in one basket. Responsible investments carry financial risk, so being mindful of your risk tolerance and diversifying your portfolio helps you reduce risk while achieving positive returns. You can start small, investing as little as $25 a month. A financial advisor can review your income, current holdings, and values to help you pick a mix of responsible investments to meet both your short- and long-term financial goals, helping you reduce risk and build wealth.

Credit unions have historically been leaders in social change. They have a long-standing history of supporting the ESG movement, as it embodies their core values of community and ethical practice. The increasing popularity of responsible investments confirms this is not a temporary trend; Canadians want their money to have an impact beyond returns. Contact your ABCU team to get started wtih your Responsible Investing journey: 1-888-929-7511.