Friday, May 6, 2005

Socially responsible investment in Canada up 27 per cent in two years, according to new industry survey

A report released today by the Social Investment Organization (SIO) estimates that socially responsible investment (SRI) in Canada has grown to $65.5 billion, a 27 per cent increase in the last two years.

The report, entitled Canadian Social Investment Review 2004, shows that there has been solid growth across most categories of SRI, including asset management, retail investment funds, community investment, shareholder advocacy and socially responsible lending.

“The market for socially responsible investment shows great potential,” states the report, based on a survey of assets conducted by the SIO every two years. “It’s clear that there is much room for growth in this market both for mainstream and non-mainstream players, and for the introduction of new products and services.”

Highlights include:

o         A total of $21.2 billion managed by asset managers on behalf of outside clients, up from $16.7 billion in 2002.

o         SRI assets managed by institutions are estimated at $25.4 billion, up from $24.1 billion in 2002.

o         Community investments are $546 million, a substantial increase from $69 million reported in 2002, mostly due to the addition of new "social economy" assets  in  Quebec.

o         Lending subject to social and environmental policies is $1.3 billion, up sharply from $127 million in 2002.

o         Sustainable venture capital, a new category in the report, is estimated at $52 million.

In spite of the growth in SRI, the report notes that relatively few investment companies in Canada pay attention to this market.

“It is apparent that the firms currently offering SRI services are capturing a larger share of this market, and average SRI assets per firm are growing sharply,” states the report. “Unless mainstream asset management firms become more aware of the potential of the SRI market, and introduce SRI products and services, this industry will continue to be dominated by a small number of players.”

Sponsors of the study commented on its findings.

“The Canadian market will expand as more consumers leverage their power by demanding greater corporate social responsibility from their investments,” said Don Rolfe, President and CEO of The Ethical Funds Company. “Today, shareholders want investments that are smart for the planet and smart for their portfolios, too, and SRI is delivering that in a big way.”

“This report mirrors what we have seen at Meritas Mutual Funds,” said Meritas CEO Gary Hawton. “Retail demand for our mutual funds has been very strong and is driven by both advisors and investors. We have also seen increasing demand within our institutional division from foundations, endowment funds and employee pension funds.”

“We have observed that interest in sustainable and socially responsible investment is rising among major institutional investors in Canada,” said Ian Ihnatowycz, President, Acuity Investment Management Inc. "Institutions are becoming increasingly aware of the long-term benefits of incorporating sustainability analysis into the investment process.”

Michael Jantzi, president of Jantzi Research Inc., said: “The Canadian Social Investment Review provides valuable insight into the traditional socially responsible investment market in Canada, allowing us to track its growth over time. It also provides a glimpse into the growing acceptance on the part of mainstream institutions that evaluating these intangibles, or ‘non-financial risks,’ is an essential part of any investment process.”

“Certainly the findings in the Canadian Social Investment Review support our view that the SRI market in Europe and North America is large and growing,” said Renee Arnold, Vice President, Canadian Marketing at Aberdeen Asset Management.

“There’s no doubt the financial services sector is an important segment of investment portfolios. Vancity and Citizens Bank have incorporated ethical policy screens into our business loans and we encourage other institutions to consider the importance of lending and investment screening to raise the level of social responsibility in their portfolios,” said Elain Duvall, Vancity Board Chair.

In spite of the growth, one sponsor commented that the relatively small number of asset managers offering SRI services could put the Canadian financial industry at a competitive disadvantage.

“The mainstream Canadian banking and investment community should heed the warning this study points to,” said Matthew Kiernan, CEO of Innovest Strategic Value Advisors. “With very few offering SRI products of any sort in Canada, this sector is falling further behind its global competitors, even from the United States, who are becoming more conscious of the segment of potential investors in SRI.”

SIO is the national association for socially responsible investment in Canada. It has about 400 members, comprised of financial advisors and investors, and staff of asset management firms, mutual fund companies and financial institutions

Copies of the report are available at http://www.socialinvestment.ca/SIReview04.pdf.

For further information:

Eugene Ellmen

Executive Director, Social Investment Organization