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Take your first step into responsible investment

Actu - Responsible Investment

During this RRSP contribution period, have you considered responsible investment ?

For the individual investor, responsible investment entails making investment decisions (such as selecting a fund manager or selecting and managing individual investments) that aim to improve corporate social behavior and corporate environmental stewardship. There are various strategies that have evolved over the years helping investors to achieve these goals.

For the most part, all investors are interested in the financial return of their investments. We can nonetheless identify two profile types on this : (1) some people get into RI to be consistent with their values, and often promote sustainability in many societal spheres. Others turn to RI because they profoundly believe that good business practices necessarily generate good returns.

Whether it be called responsible investing, sustainable investing, green investing, ethical investing or impact investing, the underlying concept remains the same — making a difference with oneʼs money while making it.

WHAT IS AN RRSP?

A registered retirement savings plan, best known as an RRSP, is a retirement savings plan that you set up, register with Canada Revenue Agency, and to which you, your spouse or common law partner contributes. Deductible RRSP contributions may be used to reduce individual tax obligations. Income earned through an RRSP is exempt from tax as long as the funds remain in the plan. Generally, you must pay tax when you receive payments from the plan.

HOW CAN YOU MAKE YOUR RRSP MORE SOCIALLY RESPONSIBLE?

The first challenge is finding a suitable financial adviser!
It’s important to understand that advisers must balance your tolerance for risk against your expectations of returns, bear in the mind the amount that you have to invest and proceed in accordance with the rules and regulations governing their professional licence(s). For the most part, financial advisers will not take into account your ethical considerations in the decision-making process. Their training does not necessarily make allowance for ethical considerations.

It is therefore crucial to either choose an adviser with a substantial knowledge of responsible investment (RI) or be prepared to educate the individual with whom you already do business
. The Ethiquette web platform proposes steps to follow for both of these paths.

Based on your risk profile and values, your financial adviser will suggest different products and solutions. You will be better poised to accept or reject these investment solutions if you have a good understanding of the different strategies and types of responsible investment products offered on the capital markets.

RESPONSIBLE INVESTMENT STRATEGIES

In efforts to better align investment with the broader objectives of society and individuals, various responsible investment strategies have emerged. They can be grouped into four main strategies: shareholder engagement ; best-in-class screening; exclusionary screening; and impact investing.

1. The engagement strategy is an approach which seeks to influence corporate practices through the priviledged shareholder (share-owner) role. To know more about this strategy.

2. The best-in-class strategy seeks out companies which perform the best based on a set of social, environmental and governance criteria, including in sectors which do not seem socially or environmentally responsible - To know more about this strategy.

3. The exclusionary screening strategy ensures that monies are not invested in companies involved in predetermined sectors (nuclear weapons, tobacco, etc.), or in violation of international standards (convention on antipersonnel mines, etc.) To know more about this strategy.

4. The impact investing strategy entails explicit intent on behalf of investors and investees to generate a defined, measurable social impact (together with financial returns). To know more about this strategy.

WHAT RESPONSIBLE INVESTMENT PRODUCTS ARE RRSP ELIGIBLE?

A variety of RI RRSP options are available including : mutual funds, exchange traded funds (ETFs), stocks, bonds and even impact investment products « made in Québec ». For more information on all of these options, consult the Ethiquette RI RRSP eligible products section.

OTHER RESOURCES TO CONSULT

Responsible investment and RRSPs
Whom do I contact ?
Preparing for a meeting with a financial adviser
What should I do if my adviser does not recommend the IR route ?
What are the returns on RI RRSPs ?
Impacts and challenges
Testimonials