What is responsible investing?

What is responsible investing?

Responsible investing is any investment strategy that considers financial and non-financial factors. Asset classes and individual securities are selected for their ability to achieve an investor’s specific investment goals as well as for their ability to align with and support an investor’s personal values.

At RBC Wealth Management, we support the merits of responsible investing. RBC is committed to community involvement, diversity and inclusion, and environmental responsibility to help the world become a better place—for both current and future generations. To help make good on our commitment to have a positive social and environment impact, we have pathways for you to invest capital in a more responsible manner.

Socially responsible investing

Socially responsible investing is also known as values-based or ethical investing. Investors are looking to make a positive change by aligning their personal values with their investment choices. This involves both negative and positive screening of companies, industries or sectors to make a financial influence that match their values.

Responsible investing in the United States showed a 38% growth between 2016 and 2018, and 18-fold increase since 1995, according to US SIF Foundation.

Environmental, social and governance (ESG) investing

ESG investors are seeking companies with leading environmental, social and governance metrics compared to their peers. These metrics may include:

	Environmental concerns — Including climate change, natural resources conservation, pollution and waste management, and water scarcity
	Social issues — Such as corporate philanthropy, community and government relations, workplace health and safety, human rights and diversity.
	Governance topics — Including accounting practices, board accountability and structure, disclosure practices, executive compensation, corporate ethics, regulatory compliance and transparency.

Impact investing

Impact investing is not charity. It is an investment where an investor is hoping first and foremost to generate social or environmental impact. An impact investor also wants to earn a return on their investment. However, they may be willing to take a capital loss as long as some tangible result for the investment can be seen. In that way, it is essential to be able to measure the impact of this investment. An example includes investment in low-income housing loan assistance, where a tangible impact is measurable (i.e., number of households able to afford housing) and the investor is likely to get his or her money back.

Impact investing—a third dimension of performance