May 08, 2009
Canadian SRI Assets Increased to $609 Billion in 2008
by Robert Kropp
Report by the Social Investment Organization finds that SRI has maintained its market share of
A recently published report by the Social
Investment Organization (SIO) found that in the past two years, assets invested according to
socially responsible guidelines (SRI) have increased by 21%, from $503.6 billion to $609.2 billion.
The numbers indicate that SRI is maintaining a share of assets under management in Canada of almost
The SIO is a national nonprofit association for the SRI industry in Canada.
Its more than 400 members, which serve more than a million Canadian depositors and investors,
regard SRI as a useful investment tool to enhance returns and reduce risk by incorporating
environmental, social, and governance (ESG) factors in their portfolio management strategies.
The report, entitled Canadian Socially Responsible
Investment Review 2008, does not reflect the market downturn of the second half of 2008 in its
statistics. However, it does indicate that such managers of large national pension plans as the Canada Pension Plan Investment Board (CPPIB) "Are
sticking with SRI criteria in their investment strategies," according to Eugene Ellmen, Executive
Director of the SIO.
Canada has a system of national pensions for every working Canadian
citizen that adopted a policy on responsible investing in 2006. The CPPIB manages $108.9 billion in
assets, representing the pensions of 17 million Canadians.
"In fact, we noted a growing
sophistication in the use of such techniques as corporate engagement by the major pension funds,"
continued Ellmen. "The CPPIB measures performance in terms of years and decades, not in months or
quarters, and the pension funds have adopted SRI criteria because the SIO and other SRI
organizations have convinced them that responsible investment is an effective long-term risk
Ellmen was careful to point out that the Canadian pension funds do not yet
apply screening for ESG criteria in their investment strategies, but apply ESG criteria in such
matters of shareowner advocacy as proxy voting and engagement with companies.
"I wish the
pension funds were going into their portfolios and doing ESG weighting," said Ellmen. He pointed
out that this was an area in which the SIO and other organizations continue to work with the
pension funds, and expressed confidence that progress toward this end was being made.
Canada maintains a significantly larger share of SRI assets under management than the US. This
is largely attributable to the investment policies of the national pension plans in Canada,
according to Ellmen.
According to the 2007 Trends Report published by the Social Investment Forum, a US-based nonprofit association
dedicated to promoting the practice and growth of SRI, $2.71 trillion, or 11% of total assets under
management in the US, use "one or more of the three core socially responsible investing
strategies—screening, shareholder advocacy, and community investing."
In Europe, according
to research conducted by the European Social
Investment Forum (Eurosif), an association of national social investment forums in Europe,
total SRI assets under management reached $3.55 trillion, or 17.6% of market share, as of December
The SIO report distinguishes between core SRI strategies and broad SRI
strategies. Core SRI strategies, according to the report, consist of screening based on
exclusionary or inclusionary criteria, community investment and social finance, and socially
responsible lending. Core SRI assets totaled $54.2 billion in 2008, compared to $57.4 billion in
2006. Ellmen attributed the decrease to market conditions and not to a lesser dedication to SRI on
the part of asset managers.
Most of the core SRI assets represent retail investment funds.
According to Ellmen, "SRI is still a relatively small part of the retail market because it
represents a relatively new activity that most asset managers, fund companies, brokers and advisors
still feel uncomfortable with."
In addition, Ellmen continued, "SIO is tackling the lack
of awareness on the part of investment advisors by developing an advisor education program."
The SIO report identifies broad SRI strategies as including the integration of ESG factors into
stock portfolio analysis and management, ESG corporate engagement and proxy voting, and sustainable
venture capital. Broad SRI assets in Canada totaled $555 billion in 2008, mostly represented by
pension funds, compared to $446 billion in 2006.
In Europe, according to Eurosif, "Broad
SRI strategies such as engagement and integration are frequently used by large institutional
investors," and represent 81% of total SRI. Unlike the SIO, Eurosif includes simple exclusions in
its definition of Broad SRI.
The Social Investment Forum's report on SRI trends in the US
does not employ the same distinction between core and broad SRI strategies, but does note that
assets in all types of socially and environmentally screened funds—which correspond to the
definition of core assets used by the SIO and Eurosif—rose to $201.8 billion in 2007.
Institutional investors that filed resolutions on ESG issues controlled $739 billion in assets in
2007, while community investing increased to $25.8 billion.
The SIO report concludes that
"In spite of these difficult times, there is evidence that Canadians want their investments to pose
solutions to global social and environmental issues." Ellmen cited research indicating that 54% of
Canadian investors believe that socially responsible companies are more profitable than
irresponsible companies, and 51% believe that social considerations are as important as financial
prospects when making investment decisions.
"SRI has lessons to teach about long term risk
management," Ellmen said.