Responsible investment (RI) has been around in one form or another for over 30 years. But interest has boomed in recent years. Climate change, corruption, cyber security and a lack of gender diversity in companies are some of the concerns that have prompted many of us to think about changing the way we live our lives and how we invest.
In fact, data shows that more than US$35.3 trillion was invested in RI around the world at the start of 2020. That's a 15 percent increase in two years. And in Canada, RI rose 48 percent between 2018 and 2020. Likewise, in the U.S., RI rose 42 percent. Canada is now the market with the highest proportion of sustainable investment assets.¹
So what is responsible investment?
RI can be used as an umbrella term related to three distinct investment strategies.
2. Socially responsible investing (SRI)
This is what is sometimes referred to as investing in line with your values. Investors screen companies in or out of a portfolio based on set criteria. As of 2020, almost US$16 trillion in assets around the world were invested into negative/exclusionary screening. 2
3. Impact investing
Here the focus is on investing in companies and projects that intend to generate a measurable positive social or environmental impact – alongside a financial return. For example, an investor seeking returns could invest their capital in a project that assists underserved communities through support for low- and moderate-income home buyers, affordable rental housing units, small business administration loans and economic development.
By 2020, 75% of women and 70% of men reported an interest in RI. That’s up from 64% of women and 57% of men in 2018. Of all the generations of investors, young people remain at the forefront of RI. More than 80% reported interest in RI, according to a recent report by the Responsible Investment Association.3 This trend signals a bright future for responsible investment. Millennials’ incomes are rising. And, they are poised to inherit US$30 trillion in the decades ahead.4
1Global Sustainable Investment Alliance, Global Sustainable Investment Review, 2020
2Global Sustainable Investment Alliance, Global Sustainable Investment Review, 2020
3Responsible Investment Association, Investor Opinion Survey, 2020
4The Globe and Mail, The great generational wealth transfer is under way, March 12, 2021.