RBC is first big bank to offer ethical funds

  • July 12, 2007
{mosimage}TORONTO - Canada’s biggest bank has just crashed the socially responsible investing party as lining up investments with values goes more mainstream.
The Royal Bank of Canada is the first of Canada’s big chartered banks to launch a suite of socially responsible mutual funds aimed at average retail investors. The three funds - a balanced fund, a Canadian equity fund and a global equity fund - are all based on the Jantzi Social Index - a listing of 60 Canadian stocks chosen for their adherence to social, environmental and governance standards.

RBC is projecting sales of $300-$500 million for its socially responsible investment funds over the next three years.

It’s the first time the socially responsible investment industry has had the clout of the big banks in its corner. The banks control 35 per cent of Canada’s mutual fund market with $249.4 billion worth of investments under management, according to the Investment Funds Institute of Canada. Banks also have nationwide networks of branches, web sites and major marketing campaigns - the kind of retailing power which smaller SRI mutual funds have lacked.

{sidebar id=2} “What that means is that for years and years the banks have simply turned their backs on this market, discredited it,” said Social Investment Organization executive director Eugene Ellmen. “You know - it wasn’t worth getting into. Now, after years and years of looking at this market and weighing the pros and cons, they’ve finally decided to enter it.”

RBC isn’t going to be alone among banks offering investments for socially aware investors. The investment arm of the Toronto Dominion Bank, TD Asset Management, has filed a prospectus with market regulators and hopes to be on the market in September with a fund which focuses on the environment and social impacts of companies in the fund.

The TD Global Sustainability Fund will be based on the Dow Jones Sustainability World Index, but will also direct 30 per cent of its assets into what fund manager Charles Edwardes-Ker calls a “satellite to the portfolio.” The satellite will invest in companies bringing new technologies to the market - technologies which can produce cleaner water, use resources more efficiently and reduce greenhouse gasses.

Edwardes-Ker is quite clear that the new mutual funds won’t be a marketing gimmick aimed at Canadians mesmerized by Dr. David Suzuki and Kyoto Protocol headlines. The funds will have to perform - make money.

“We think people who care and want to make a difference will be interested in this fund. But we realize we are trying to make money for our future unit holders,” he said.

“The philosophy behind our entire fund is that the kind of companies that are indeed leaders in global sustainability, and the leaders in environmental technology will outperform over the long term.”

David Richardson, vice president of RBC Asset Management Inc., said it simply makes sense that companies with the smarts to take the environment, human rights and globalization into account will be better managed, more efficient and better investments than the dinosaurs of Dickensian capitalism.

“A growing number of investors recognize that evaluating companies based on environmental, social and governance factors is not only a viable way to screen investments according to one’s conscience, but is also an effective way to evaluate a company’s ability to manage risk, to manage people and to manage their business effectively,” said Richardson in an e-mail to The Catholic Register.

After 15 years on the outer fringes of the investment world, Jantzi Research Associates Inc. CEO Michael Jantzi is swimming along quite nicely in the middle of the mainstream. His company, which researches the market and advises investors on environmental, social and governance issues, is riding the waves of concern about shady corporate governance and environmental meltdown.

The spring the Jantzi Social Index also became the basis of a new exchange traded fund launched by Barclays Global Investors Canada Ltd.

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