Talking SRI: Initiating productive conversations with your clients about Socially Responsible Investing November 2002
by Sucheta Rajagopal, LL.B., CIM, FCSI, CFP
Two of today's top news stories, corporate ethics scandals and the Kyoto accord, provide a perfect lead in to talk to your clients about socially responsible investing. Discussing SRI can help you reassure your clients about the markets, provide some much needed good news, and ultimately create stronger client relationships.
More and more investors are becoming aware of socially responsible investing, but are not sure of how to invest, what avenues are available to them, and how to assess the risks and rewards of SRI. Given the increasing profile of SRI, and the advertising campaigns of some SRI fund companies, it's a great time to learn more about this area, and to position yourself as a resource for your clients and prospects. There is a small but growing group of committed socially responsible investors, and for these people, if you won't help them invest responsibly, they will find an advisor who will. However, for most investors who are interested in learning more about SRI, but who are not perhaps as knowledgeable, you can create an opportunity to build rapport by discussing their interests in the environment, or international human rights or labour issues (sweatshops), and introducing them to investments that affirm their personal values.
When your clients ask how they can avoid the Enrons and the Worldcoms and what appears to be endemic corporate malfeasance, this is the time to ask if they might be interested in investing in 'ethical'companies. While there is no perfect company out there, there are many companies who are trying to do better on a variety of fronts, corporate social responsibility being one of them. For more information, check out the websites of the SRI fund companies, as well as the report of the Canadian Democracy and Corporate Accountability Commission at www.corporate-accountability.ca.
The Kyoto protocol is another topical entry point to a discussion of SRI. While some oil patch executives feel that our natural resource sector will be decimated by ratification of Kyoto, there are many other voices who believe that reducing emissions, and increasing our use of environmentally friendly technologies, makes good sense. There is a wealth of interesting information at www.davidsuziki.org. Once you and your client are talking about trying to improve the environment, it's easy to ask if they are interested in investing in a mutual fund for example that screens out the worst polluters. A little bit of time spent looking at SRI mutual fund websites will go a long way in terms of providing you with information. Your wholesaler will also be happy to come out and meet with you, or even offer to do seminars for your clients. SRI fund companies are committed to helping advisors learn more about SRI, and how to attract assets.
The basics of SRI involve screening in 'good' companies, and eliminating 'bad' companies from investment portfolios. For this we rely on the fund companies and managers offering socially responsible funds, and on research providers for reports on individual companies. A complete list of these can be found at the Social Investment Organization's website www.socialinvestment.ca. However, a growing area of SRI is shareholder advocacy and activism. This involves engaging with companies, using your power as a shareholder to influence corporate behaviour. Investors who are interested in SRI are often involved in environmental and other issues, and come to SRI through their desire to improve corporate behaviour. Getting involved in campaigns that your clients are a part of and letting your clients know about existing campaigns that they can take part in is an excellent way to broaden your relationship with these clients. As a prospecting tool, it allows you to drip on your pool of prospects in a low key way, and it works no matter what the market is doing, a definite advantage these days. Information about campaigns and actions is available on a number of websites, including www.kairoscanada.org.
This article would not be complete without the question that must be addressed with clients and prospects, and that you need to feel comfortable with as well. Will socially responsible investing hurt my returns? Studies done to date show that socially responsible investments can perform as well as, or better, than other investments. As more research is completed in this area, we will have more definite answers, but also perhaps a multitude of new questions. The Social Investment Organization is the umbrella group for socially responsible investing in Canada. Their website is a fountain of information, including links to SRI mutual fund companies and many other relevant organizations. In the What is SRI section they have an SRI FAQ which cites statistics on SRI performance and links to various studies.
If you think that you may want to develop SRI as part of your business, the Social Investment Organization has a membership available for investment professionals, which includes access to and mentoring by existing advisors who are using SRI to build their business. For further information, check out the website, or call Lisa Hayles at 416.461.6042.
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