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I want to combine ethical investing with good returns, but feel that I'm limited in my choices. Can you give me more information on ethical investments?

Just a few years ago, there were limited choices in Canada when it came to ethical, or social and environmentally conscious investments. But times have changed dramatically.

When ethical investing first joined the Canadian forefront in 1989, there were only three ethical mutual funds to choose from, representing about $100 million in assets. Today, there are close to 25 funds available, with growth in assets soaring over $6 billion. While socially responsible fund assets represent less than 2 per cent of total mutual fund assets in Canada, their popularity has outpaced the rest of the industry four to one. Many misconceptions continue to surround ethical investing. Here are the three most common myths that may mislead investors:

Myth: I am limited in my choice of ethical investments because of moral standards that can't be met.

First, let's look at the word "ethics". Ethics, for many people, conjures up the image of high morals and ideals that are difficult to obtain. The term socially responsible investing (SRI) is now more widely used to describe these investments. While they can "screen" out companies that don't meet socially responsible standards - such as tobacco producers, weapons manufacturers and environmental polluters - money managers realize that no perfect company exists. Instead of concentrating on the negative, ethical investing today concentrates on the positive. This emphasis alone is a powerful catalyst. More and more companies are incorporating proactive initiatives on the environmental and social side - everything from more energy-efficient technology, to recyclable products, to employee relations, to community involvement. Social investing considers positive-attribute performance as part of the equation when choosing a company. Because of these factors, investors may be surprised to find a wide variety of industry sectors in an ethical portfolio, including mining corporations, forestry and hydro companies, consumer product manufacturers and financial institutions.

Myth: Socially responsible investments under perform other investments

According to a study in 1999 by Morningstar, a leading provider of mutual fund research data, socially responsible mutual funds in the United States are twice as likely to earn Morningstar's highest rating as all mutual funds in general. As well, the Domini Social Index (DSI) that tracks 400 U.S. corporations that pass multiple, broad-based ethical screens has outperformed the S&P 500 over a ten-year period. According to Michael Jantzi, author and founder of Michael Jantzi Research Associates, "piles of research are coming to the fore (indicating) that companies that pay attention to social and environmental issues are also better long-term financial performers, compared to their counterparts who ignore this reality."

Myth: Companies may say they're "ethically oriented" but how can you tell?

Industry professionals that manage socially responsible portfolios look at what a company does, not what it says it does. In a sense, these money managers are a cross between a financial analyst and an investigative journalist. As a social investment analyst, they use the same tools as a financial analyst, the same databases and annual reports. They also talk to shareholders, government regulators and community groups. Most important, these money managers also talk to the companies themselves and, in doing so, educate the companies to the fact that investors do look at social and environmental performance as part of the decision-making process.

No Myth: Shareholders can make a difference

As a shareholder, you can encourage a corporation to adopt more social and environmental behavior. You have a right to express your concerns through many routes. You can voice your views through a letter, ask to speak to a senior executive, or ask questions at the annual meeting. Lastly, if you wish further information on the growing number of ethical investment products now available, including an array of labour-sponsored investments, discuss this with your financial advisor or take a look at the references listed below.


The 50 Best Ethical Stocks for Canadians, by Deb Abbey and Michael Jantzi, published by Macmillan Canada, 2000. The Ethical Investor, A Guide to Socially Responsible Investing in Canada, by David Skinner, published by Stoddart Publishing Co. Limited, 2001. Investing for Good, by Kinder, Lydenberg, Domini, published by Harper Business, 1993 Web site: www.mjra-jsi.com: for information regarding the Jantzi Social Index.