How to invest with mindfullness
ILLUSTRATIONS BY COLIN COOK
If you’re like most people, you find it difficult to scroll through social media sites without learning someone’s opinion on pivotal social or environmental issues, both locally and abroad. Perhaps you are even one of those proponents, sharing information and guidance surrounding these issues. If so, good for you!
Social media and the internet are wonderful tools that allow us to educate and express ourselves in ways never before dreamed. But, if you are someone who spends a lot of your time thinking about, speaking about, and sharing information about social and environmental issues, perhaps it’s time to take a look at how you can take steps to make an impact in these areas yourself; by putting your money where your mouth …or your heart is.
Environmental awareness has never been so heightened as it is now with the ability to consume as much information as humanly possible about issues at home and abroad. But what role can you play in helping to alleviate some of these issues?
It can start with simply buying local from your farmer’s market or supporting local coffee shops or cafés that give you the reassurance of knowing where your food is coming from and the satisfaction of knowing you are supporting your neighbours.
Our ideations and values can drive our decision-making and actions, but it can go far beyond just retail purchases, and into the realm of investments with Responsible Investing.
RI is a new concept that has evolved from our ever-growing socially conscious world, but how easy is it to make your investments mirror your values and still see your money perform?
It will take time and it will take effort, but the rewards will outweigh the work.
What is Responsible Investing, exactly?
Simply put, Responsible Investing is the ability to incorporate environmental, social, and governance factors into the selection and management of your investments, also known as ESG.
Why is this important? Because it can not only lead to better financial returns and reduced exposure to risk, but it can also contribute to positive social and environmental impacts that align with your own personal values. RI includes shareholder engagement, thematic investing, ESG integration, negative screening, positive screening, and impact investing.
By this point you’re probably finding the number for your investor and figuring out how to split your funds so that you can begin investing in your values and feel good about making a difference. I know it’s tempting, but keep reading before you reach for the phone.
Something you need to keep in mind is that the concept of Responsible Investing is new and it’s not as simple as making a phone call and forgetting about it.
RI has only been growing in popularity over the last decade, meaning most investors, especially the more seasoned ones, don’t have all of the details at their fingertips. Research and digging by both brokers, and those looking to make the investment for you will be required to make a successful leap into RI.
“You have to understand the product, benefits, and risks,” explains David Whittemore, Financial Services Investment Advisor for Manulife Securities Inc.
Where do you start?
How and where do you start with RI? How easy is it to make your money match your values?
First of all, you need to narrow down what it is you are passionate about. Is it the environment? What about human rights? Or food scarcity? Narrowing down which area you want to begin researching will help your zero in on the companies that really align with your true values.
Once you know which area you want to begin with, next comes the research. It may seem like a daunting task, but think of all of the time you spend writing status updates or sharing news articles about the environment. Now you can direct that energy into tangible results.
As Whittemore notes, here’s where you start: “You need to understand and look at a company’s financial statements, their future plans, how they generate revenue, what investments they hold, etc.”
It’s one thing to say you want to invest in clean water, but once you start doing your research, you discover that the company you intended to invest in has holdings in oil or has exposure to military arms, for example, the sin stocks, something you are abhorrently against.
Don’t get discouraged. This is a good thing when you unearth this information, because it means that you didn’t take a leap and regret investing in a company that was against your values.
Like I mentioned before, it’s not going to be easy, but how focused and deep you go in your research depends on how committed you are to supporting your values.
Some information will be readily available on company websites, like the number of women in executive roles, or how much money was devoted to deforestation. But you will need to dig deeper. Look into the products, read reviews, pick up the phone and start asking the questions you want answers to.
It might be easier in the beginning to start with investing in Mutual Funds. This will give you a taste of different ESG investments so that you can get a feel for how it works and the kind of return you might expect.
Once you become more comfortable with RI, you can begin investing in companies or Community Investment Funds. The options are abundant depending on your goals and how closely you want to match your money with your values. And as with any investment, you need to determine how much risk you are prepared to take before jumping in.
Whittemore says, “It is incredibly important when looking at RI to determine your comfort of risk level and time horizon.
“RI is a very interesting part of the market because it is constantly changing.” Which means there are always opportunities to grow and get deeper into RI.
The more people pursue RI, the more companies will begin to listen and change their methods or sources of income to align with what the investors want. And it can begin right at home.
How to keep it close to home
Are you ready to put your money where your mouth is? Why not start locally?
Although there is no clearly defined list of companies that align with ESG,
a simple Google search will open the door to local companies that are doing great things that align with your values.
For example, if you are interested in investing in clean energy, you can begin by searching for companies in Nova Scotia that provide wind, turbine, solar, or other forms of power.
A quick search of solar energy companies in Nova Scotia brings up
a Community Economic Development Corporation looking for investors.
From there, you can comb through their website and see they have a Board of Directors where women make up 33 percent of the board. You can also see that this particular investment may be a high-risk, longer-life investment because of the nature of the business.
From there, search out the products, reviews, and pick up the phone to ask about the information you can’t find.
The best thing to do, says Whittemore, is, “Do your research, and create a list of possible companies that you want to invest in, and then once you have that list, see your broker and go over the research you have compiled together to determine the best fit to align with your values and your goals. RI is a way to make an investment and make a difference while also getting that return on your investment.”
It’s not something you can do overnight. It will take time, and it will take patience, but the feeling of knowing your money is out there helping make the world a better place while also earning you some sweet dividends is reward enough.
If you take the time to do your research, you can very easily put your money where your mouth is!
Responsible Investing: Responsible Investing is the ability to incorporate environmental, social, and governance factors into the selection and management of your investments.
ESG: Environmental, social, and governance (in relation to Responsible Investing options or values).
Community Investment Funds: These include things like local windfarms where you can invest smaller amounts of money while still making a difference locally. These tend to be longer-life investments.
Community Economic Development Corporation: Is a corporation that actively elicits community involvement when working with government, and private sectors to build strong communities, industries and markets.
Comfort of risk level: This is how comfortable you are with losing money. Are you willing to put your money in high-risk investments where the reward could be great, but so could the loss? Or low-risk investments where you may make less money but there is also less chance of losing money?
Time Horizon: This refers to the amount of time you are comfortable with your money being tied up in investments.
Long-life investments: These investments can take five- 10- or 15 years down the road before dividends are paid out.
Mutual Funds: A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities.
Shareholder Engagement: This refers to the ability of a shareholder or investor to be included in analyst conference calls, quarterly earnings calls or annual general meetings.
Thematic Investing: Thematic Investing (TI) develops portfolios that benefit from long-horizon investment themes across the globe. TI’s in-depth research informs a view on how innovations in technology and business models, or demographics will impact industries and companies – in some cases decades into the future.
Negative Screening: means excluding companies that do not comply with specific, pre-set social or environmental criteria.
Positive Screening: Positive (or affirmative) screening means that rather than excluding companies, investors select companies that set positive examples of environmentally friendly products and socially responsible business practices.
Impact Investing: refers to investments made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.