Responsible investing: 4 myths explained
Are you one of those who wish to reconcile financial return with an interest in social and environmental issues? Thanks to responsible investing (RI), it is possible.
Responsible investment is a form of financial investment that takes into account certain environmental, social or governance (ESG) issues without however neglecting the financial return for the investor. In addition to the assessment criteria used in traditional investing, socially responsible investing incorporates ESG criteria in the selection and management of investments and investments.
While responsible investing has been around for over 20 years, some myths persist about it. Here we provide answers to any questions you may have regarding IR.
Myth 1: Investing in RI requires sacrificing returns
Reality: As an investor, you want to grow your assets. This is also true for those who choose IR.
The return on RI is also intended to be attractive, sometimes potentially higher than that of traditional investment. In 90% of the cases studied, the inclusion of environmental, social and governance (ESG) criteria showed a neutral or positive effect on returns, according to an analysis of 2,000 studies published since 1970 [Note 1].
Myth 2: RI is a passing trend
Reality: On the contrary, RI continues to expand rapidly and now accounts for over 50% of the Canadian investment industry, up from 37.8% in 2016 [Note 2]. RI assets under management exceed $ 2,000 billion in Canada.
The growing confidence of Canadian investors confirms that RI is not going away.
Myth 3: RI is an underdeveloped market
Reality: The IR is a global movement. In 2006, the United Nations launched the Principles for Responsible Investment (PRI) to facilitate the matching of practices among large investors.
The Global Sustainable Investment Alliance publishes the Global Sustainable Investment Review every two years, which portrays RI around the world. Eight regions are covered in this report: Europe, the United States, Canada, Australia and New Zealand, Asia, Japan and Africa. The global RI market was worth US $ 22.9 trillion in the regions targeted by the report as of December 31, 2015.
Myth 4: RI is for idealists
Reality: The early responsible investors wanted to be true to their principles and values by not encouraging repressive regimes where activities are harmful to human beings.
As an investor, it is important to choose investments based on your time horizon and your tolerance for risk. However, with RI, you can also integrate sustainability into the management of your investments.
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