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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$30.7 trillion was invested in RI around the world at the start of 2018. That's a 34 percent increase in two years. And in Canada, half of all professionally managed money is in responsible investments. 1

So what is responsible investment?

RI can be used as an umbrella term related to three distinct investment strategies.

responsible investment esg umbrella en

Environmental

  • climate change
  • greenhouse gas (GHG) emissions
  • resource depletion, including water
  • waste and pollution
  • deforestation

Social

  • working conditions, including slavery and child labour
  • impact on local communities, including indigenous communities
  • conflict
  • health and safety
  • employee relations and diversity

Governance

  • executive pay
  • bribery and corruption
  • political lobbying and donations
  • board diversity and structure
  • tax strategy

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. Today, more than US$19 trillion in assets around the world are invested into dedicated SRI strategies. That's up more than 30% since 2016. 2

Positive screening

Using ESG measurements to select specific companies or sectors

Sustainability themed

Building portfolios that only include investments that meet specific ESG criteria

Exclusionary screening

Using ESG measurements to exclude specific companies or sectors

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.

Of all the generations of investors, young people are at the forefront of 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. As they invest that wealth, they will likely fuel the growth of RI.

1Global Sustainable Investment Alliance, Global Sustainable Investment Review, 2018
2Global Sustainable Investment Alliance, Global Sustainable Investment Review, 2018
3Responsible Investment Association, Investor Opinion Survey, 2019

To learn more about responsible investment, click here.

Disclosure

This has been provided by RBC Global Asset Management Inc. (RBC GAM) and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. RBC GAM takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when provided. Information obtained from third parties is believed to be reliable but RBC GAM and its affiliates assume no responsibility for any errors or omissions or for any loss or damage suffered. RBC GAM reserves the right at any time and without notice to change, amend or cease publication of the information.