Green Investing

February-March 2001

This is an article from WaveLength Magazine, available in print in North America and globally on the web.
To download a pdf copy of the magazine click here: > DOWNLOAD

by Chris Bowman

Not everybody agrees with the politics of big business. But that doesn't mean you have to avoid investing altogether. Instead, consider playing financial markets through so-called "ethical" mutual funds. These funds invest your money only in companies that fit their standards for being ethically, environmentally or socially responsible.

Ethical funds operate in the same manner as conventional funds, with one important difference: they carefully screen the companies in which they invest to ensure they meet certain ethical criteria. For example, the screening process can be designed to rule out investments in companies that distribute alcohol and tobacco products, engage in harmful environmental activities, make products that are hazardous to health, do business in countries with repressive political regimes or racial oppression or that have a record of poor relations with their workers.

The screening process can be comprehensive. It may involve sifting through corporate holdings to ensure the company and its subsidiaries aren't engaged in questionable practices, determining where and how the company does business, sorting through its lists of customers and monitoring business practices. For an individual investor, this would be extremely difficult or even impossible.

Beyond the screening process, ethical funds generally offer all the benefits of other funds. These include professional investment management, ease of investing, and investment diversification, depending on the fund's objectives.

You don't have to sacrifice investment returns by investing in ethical funds; the top performers are often right up there with the best conventional funds. However, you should be aware that the investment styles of these funds can range from conservative to aggressive-a factor that can affect the risks of investing in a particular fund. As with all mutual funds, this should play a part in your investment decision.

There are a number of ethical funds available. Not all use the same standards to make investment decisions, so you should determine their ethical criteria by examining fund literature.

For example, in Canada, the Investors Summa Fund is an ethical fund that invests primarily in Canadian companies that are socially responsible, and have adapted progressive standards and practices illustrative of an awareness towards economic, social and environmental issues. The fund avoids investments in companies that manufacture or distribute alcohol or tobacco products, companies that manufacture weapons and those involved in the gambling industry. The fund also attempts to avoid companies with poor pollution control and environmental records and those that support activities of repressive political regimes.

Here is a brief summary of some of the funds available to you in Canada.

Clean Environment Funds. Managed by Acuity Funds Inc. There are three Clean Environment Funds that invest in companies reflecting the concept of sustainable development. Stocks are chosen according to a scientific analysis based on sustainable technologies, processes or products. (Acuity Funds have just launched two new mutual funds, the Acuity Social Values Canadian Equity Fund and the Acuity Social Values Global Equity Fund. Contact: David Holmes: 416-628-5605, dholmes@holmesmark.com)

Desjardins Funds. Managed by Desjardins Trust. Includes four funds. Three hold units in various Ethical Funds, screened for industrial relations, racial equality, tobacco, military production, nuclear energy and environmental practices (see below) As well, Desjardins manages the Desjardins Environment Fund, which screens on a broad range of environmental issues.

Ethical Funds. Managed by Ethical Funds Inc. Includes 12 funds. These funds screen for industrial relations, racial equality, tobacco, military production, nuclear energy and environmental practices. Ethical Funds does not invest in tobacco companies and companies whose primary activity involves military production and nuclear energy. Ethical Funds also encourages companies to respect the environment and basic human rights, and practice progressive industrial relations.

Mackenzie Universal Global Ethics Fund. Managed by Mackenzie Financial, the Universal Global Ethics Fund positively screens for community involvement, education and training, healthcare, employee relations, audits and openness, relationships, corporate governance and various environmental criteria. Negative screens include: alcohol, gambling, tobacco, irresponsible marketing, armaments, oppressive regimes, pornography, animal rights and various environmental criteria.

YMG Sustainable Development Fund. Managed by YMG Capital. The fund uses a sustainable development index (SDI) of at least 80 measures of social, economic and environmental sustainability. The fund also uses an economic value-added (EVA) approach to evaluate the investment-worthiness of companies.

Chris' article is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitations, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact a financial advisor.

Chris Bowman is a Financial Advisor at Investors Group Financial Services in Nanaimo, BC. He has a B.Sc. in Economics from the University of Victoria. Phone: 250-754-8223 Email: chris.bowman@investorsgroup.com©