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New Directions in Socially Responsible Investing. Time for Citizens to Take Control.
We have come to a critical juncture in the evolution of Socially Responsible Investing (SRI) in Canada. Over the past few years we've seen a dramatic growth in socially and environmentally screened assets. More and more individuals and institutions are now making investment decisions that reflect their personal values or the mission of their organizations.
Through the availability of social indices such as the Domini Index in the US and the newer Jantzi Social Index in Canada, the business case for SRI has been made: returns on SRIs are competitive, and perhaps even better than traditional mainstream investment returns. While this is exciting news in the quest for a sustainable planet and social justice for its inhabitants, it really only marks the first stage of SRI's potential for social change.
Using portfolio screens certainly results in investments that we can feel good about owning and allow us to sleep at night. We would all prefer to own only shares in the most progressive companies. Those companies that treat their employees and communities well, while respecting the environment, are also likely to be more profitable long term as they avoid labour strife, environmental liabilities and so on. But is this the most effective route for leveraging our investment dollars for change? Probably not. It is time to start moving beyond this "feel good" stage of SRI and start exploring the untapped power of shareholder activism in the quest for social change.
Shareholders have traditionally valued the bottom line above all else, and yet we know that a majority would be incensed if they knew that the companies in their portfolios contributed to environmental or human rights abuses. As active shareholders we can make such companies sit up and take notice when we ask them to be more transparent and accountable in terms of their own business practices and those of their suppliers, subsidiaries, and other stakeholders. Transparency and accountability will lead to credibility and, ultimately, profitability. These are fundamental principles that we must address as socially responsible investors.
What tools of corporate engagement do we have at our disposal as active shareholders? Proxy voting is an obvious starting point. Individual share holdings, and perhaps more importantly the larger collective holdings of mutual funds or pension funds, can and should be carefully voted at company meetings according to socially responsible voting guidelines reflecting those individual's or organization's values.
Recent changes in Canadian legislation have made it easier for social investment activists to bring meaningful shareholder resolutions before their shareholders. Historically such resolutions, whether or not they are approved by the shareholders, have had many positive outcomes as the affected companies try to move in a more acceptable directions forestalling future resolutions, and avoiding negative publicity.
Engaging a company in dialogue can result in positive win - win scenarios that avoid the necessity of passing actual resolutions. Changes adopted on a voluntary basis by a company are also much more likely to be implemented and retained long term as all stakeholders have an interest in their success. Of course not all such dialogues will end on a positive note. At this stage the more confrontational shareholder resolution path remains open.
There is no shortage of pressing issues that need these tools brought to bear. Some of the themes that will see particular attention in Canada this year include child labour, sweatshops, companies operating in areas of conflict and the practices they engage in and maintaining criteria for ecological sustainability in investment and financing decisions.
Perry Abbey is a SRI consultant and broker for United Capital Corporation, a joint labour-sponsored ethical investment firm in Vancouver.
The Columbia Journal
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