Study Results: Socially Responsible Investing
by Mary Bowyer
Have you ever wondered how or to what level Canadian charities participate in socially responsible investing? That’s exactly what Chelsea Hunt and Sean Campbell, both at the University of Waterloo, set out to assess. With the support of a research grant from the AFP Foundation for Philanthropy - Canada, their study reviewed the investing strategies of Canada's charitable sector to uncover the current socially responsible investment (SRI) techniques for comparison and best practices.
SRI, sometimes also referred to as responsible or ethical investment, is about taking steps to ensure that a charity’s investments reflect its values and does not run counter to its aims. It describes an investment approach that takes environmental, social, ethical and governance factors into consideration in investment decisions. Impact investing is a form of SRI that seeks to generate a measurable, beneficial social or environmental impact alongside a financial return. Recent years have seen finance, and especially the dangers of an irresponsible approach to finance, placed centre stage. Within this period, public expectations around charities’ approach to SRI has also increased.
Methodology and findings
The financials (T-3010) of the largest Canadian charities were reviewed by investment income to investigate their financial performance and associated characteristics. In addition, a qualitative review of investment policy statements and disclosure of investment practice was conducted to determine the scope of practice and transparency (disclosure) provided by individual charities. Here are some highlights:
- Each charity considered in the review had a unique approach to SRI. Some offered a comprehensive strategy that included multiple factors such as investment philosophy, impact investing, screens and investment managers while others only disclosed one area of focus in terms of responsible investing.
- The study did not find that there were significant financial hurdles to charitable participation in SRI strategies versus other investment strategies. Furthermore it would be useful for leading charities to communicate their approaches to support wider adoption and opportunity to other charities.
- Direct impact investments, which do not rely on public market investments, are capable of furthering charitable purpose as well as earning a return, even during a recession.
- There is room for significant growth of RI within the charitable sector and many more opportunities for further research as the field of SRI expands within the charitable sector. These areas include:
- Understanding the path that RI charities take to become leaders
- The impact of positive and negative screening
- Impact investing metrics
- Impact of current evaluation practices
- Analyzing different laws and regulations
A full copy of the report can be found here.
Special thanks to donors to the AFP Canada Foundation Every Member Campaign and 2015 Canadian Leadership Retreat attendees for supporting this research.
Also, the following groups helped make the research possible:
- AFP Foundation for Philanthropy–Canada board of directors
- AFP Foundation for Philanthropy–Canada research committee
- Lorelei Wilkinson, CFRE (chair)
- Nowshad Ali, CFRE (past chair)
- Mary Bowyer, CFRE
- John Gormaly
- Lori Gusdorf, CAE (ex officio)
Mary Bowyer, CFRE is a Philanthropy Specialist based in Toronto.