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December 03, 2003
Two New Real Assets Funds Attract $25 Million in Their First Two Months
    by William Baue

The Real Assets Social Leaders Fund and Social Impact Balanced Fund are off to a flying start, re-invigorating social investing in Canada.

The number of options for Canadian social investors to diversify their portfolios with mutual funds just grew. Vancouver-based Real Assets Investment Management recently launched two new Canadian socially responsible investment (SRI) retail funds, which have grown too. Investors are showing strong support for the funds, as the Social Leaders Fund and the Social Impact Balanced Fund stand at $25 million in assets after their first eight weeks of operation.

The Social Leaders Fund is a global equity portfolio of 25 to 100 of the “very best corporate citizens.”

“The Real Assets Social Leaders Fund is Canada's first example of true positive screening,” said Deb Abbey, Real Assets’ CEO and portfolio manager. “Other funds claim to do positive screening, often calling it a ‘best-of-sector’ approach, which means they screen out the worst companies on social, environmental and ethical performance measures in certain industries.”

“But ‘best-of-sector’ is really a misnomer--this approach should be called ‘worst-of-sector avoidance,’ as it's actually a kind of negative screening,” Ms. Abbey explained to “The Social Leaders Fund is the only Canadian fund that selects companies on the basis of outstanding leadership in social and/or environmental performance--and their ability to demonstrate the financial benefits of that leadership.”

Real Assets selects the “social leaders” that constitute the fund according to six criteria, including environmental sustainability, transparency and accountability, community relations in interaction with all stakeholders, and financial metrics. The fund’s top three holdings include Novo Nordisk (ticker: NVO), Nokia (NOKBF), and Church & Dwight (CHD).

The Social Leaders Fund should not be confused with the same-named fund Real Assets launched in February 2002 aimed at “sophisticated investors,” a Canadian designation for high net-worth individuals.

“It has the same name but is a different fund with different investment parameters and different holdings, although obviously some are the same,” said Ms. Abbey. “We closed the original pooled fund when the regulatory environment in Canada changed, making pooled funds difficult to sell to individuals.”

The Social Impact Balanced Fund is an index-based product composed of Canadian and US stocks as well as Canadian fixed income. The Canadian equity component should match the S&P TSX Composite; the US equity component should match the S&P 500; and the Canadian fixed income returns should match the Scotia McLeod Bond Universe. The fund screens out the worst social and environmental performers in its universe, but it focuses its efforts on improving corporate practice through shareowner action.

Real Assets is introducing two new shareowner action campaigns in the 2004 proxy season. One focuses on the glass ceiling, or obstacles to women’s corporate advancement, and the other on the HIV/AIDS pandemic. Real Assets will also expand its climate change campaign while continuing with current campaigns including those addressing water scarcity, human rights, and responsible finance.

These campaigns are generating real change. Last year, for example, Real Assets co-filed shareowner resolutions that asked the five major Canadian banks to assess environmental and social risk. The filers withdrew the resolution at Canadian Imperial Bank of Commerce (BCM) in exchange for board-level dialogue.

Today, the bank announced its adoption of the Equator Principles. These principles are a voluntary set of environmental and social screening guidelines for evaluating on a global basis development projects with capital costs exceeding $50 million in all industry sectors.

“This is a major breakthrough in our responsible finance campaign,” said Ms. Abbey. “The bank also agreed to begin incorporating Global Reporting Initiative (GRI) social performance indicators in its Public Accountability Statement and its annual report, and expects to incorporate environmental performance indicators once GRI’s Financial Sector Supplement is complete.”

Bank of Nova Scotia (BNS) has also made substantive steps forward, according to Ms. Abbey. However, Real Assets has re-filed the resolution with Bank of Montreal (BMO), and is prepared to re-file with Toronto-Dominion Bank (TD) if shareowner dialogue does not result in action.


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