Finding Inspiration When It Comes To Socially Responsible Investing

At first glance, the Spring 2017 fashion collection from Dutch designers Viktor Horsting and Rolf Snoeren (Viktor&Rolf) doesn't seem like a likely source of inspiration for an investor.

The designs, assembled from old, ruined party dresses from the 1940s and onward, are a patchwork of tulle, ballerina-pink duchesse satin, gold trim and lace. Eccentric — though not without their charms once you know the creation story — they're not recommended attire for an important job interview or first date. Despite the Boulevard of Broken Dreams collection title that conjures dashed hopes, the designers insist their message is upbeat: fragmented pieces can be made whole again. This aligns with a popular trend in investing — social responsibility.

Upcycling, which transforms unwanted or tired materials into new and often more valuable products, has been embraced by many Millennials looking to blaze their own style trail. One beauty of upcycling is that desirable and valuable products are less likely to end up in landfills. According to second-hand store Value Village, North Americans send around 9.5 million tonnes of clothing to landfills each year. While also offering a creative outlet, it's easy to see the "green" or "ethical" appeal of upcycling for the environmentally and socially conscious.

Socially responsible investing has been gaining traction in recent years. In 2015, Canada's responsible-investment market had more than $1.5 trillion in assets under management, a 49 per cent jump from 2013, according to the Responsible Investment Association's 2016 Canadian Responsible Investment Trends report. The trade group says responsible investing — which melds environmental, social, and corporate governance (ESG) factors — accounts for 38 per cent of the Canadian investment industry. Assets held by individual investors in the market totalled $188 billion at the end of 2015, a whopping 91 per cent increase over two years.

Socially Responsible Investing: Digging In

So what are some considerations when it comes to socially responsible investing? Identifying what you're authentically interested in and the specific criteria that are important to you can be a good start. One way is to think about positive criteria that's important to you, such as corporate citizenship. Others may screen out investment options based on what they consider as negatives. Traditionally, socially responsible investing has tended to avoid companies involved in gambling, tobacco, alcohol or nuclear power, for example.

Typically, socially responsible companies will be leaders in good governance, environmental stewardship and humane employee practices. Digging deeper, governance factors can revolve around things like director compensation and board mandates, while environmental considerations can include emissions, water use and waste management. Social factors encompass areas such as human rights, health and safety, and community relations.

Under Canadian securities rules, public companies are required to disclose all material information, including related to environmental and social issues. On top of that, many Canadian companies have been disclosing their ESG impacts in voluntary annual reports for more than 20 years, according to a progress report last year on sustainability reporting from Stakeholder Research Associates Canada. That report showed 65 per cent of companies listed on the TSX Composite Index offer some public disclosure on their sustainability initiatives.

As an alternative to investing in individual companies, there are a growing number of socially responsible-focused funds. Last year, investment research firm Morningstar launched a new sustainability rating for global mutual funds and exchange-traded funds to allow investors a way to evaluate how they are meeting ESG issues. The rating is available for more than 20,000 funds, according to Morningstar.