It’s been nearly a year since joining Nick here at RBC Dominion Securities. I have learned so much more than I was expecting and it has been a pleasure meeting you, his clients.
With Nick away this week, I asked if I would be able to write a weekly comment for his blog…little did I know I would have the worst case of writer’s anxiety that I’ve experienced since my first writing assignment at Journalism school.
What do I write about?
Who’s going to care what I think about the current market conditions?
How are my insights going to be as insightful as Nick’s?
Then, of course, this train of thought leads to the dark rabbit hole of second guessing everything that I thought I knew.
When it comes to investing, I’m pretty new to the game.
While I have more than four years of experience in investment services administration and an educational background in political economics, before coming to work here I had been much more hands-off with my own investments.
To be honest, I kept my head in the sand in regards to what my money was invested in as long as I didn’t have less than what I had started with.
When I got my first “grown-up job,” with BMO InvestorLine’s operations team in Toronto, I dumped what few savings I had into a conservative RSP portfolio made up strictly of mutual funds and set up pre-authorized monthly contributions.
I remember feeling quiet proud of myself, like I had successfully “adulted” that day.
“This must be what being a grown-up feels like,” I laughed with my friends over a cold pint after work that evening.
Fast-forward two months to when the realities of student loan repayment set in.
There was no way to make ends meet without cutting out fancy coffees; saying goodbye to my shoe and clothing budget; skipping Friday after work happy hours with my colleagues, and completely neglecting my retirement.
Now, a decade later, I’m grateful to be in a position to refocus on my savings and actively invest them under the tutelage of one of the most knowledgeable and experienced Investment Advisors I have ever met.
Slowly but surely, I’m building—with Nick’s oversight—what I lovingly refer to as my “crunchy granola portfolio.”
Renewable energy, organics, water infrastructure and agriculture make up its bulk; oil and natural gas companies have been purposefully left out.
When I discussed the composition of my “crunchy granola portfolio” with my uncle and explained to him how under no circumstances would I personally invest in the oil and gas sector, he literally laughed at me and said there was no way I could ever make a difference, so I might as well grow up and make money.
I don’t buy that and I am not alone.
According to Morgan Stanley research, “a younger generation of investors, who overwhelmingly believe that their investment decisions can make an impact, is leading the sustainable investing charge.”
The majority of Millennial investors surveyed—86 per cent to be precise—are “very interested” or at least “interested” in sustainable investing, and 61 per cent have put their money where their mouth is, having “made at least one sustainable investment action in the last year,” says an article found on the Visual Capitalist website.
While most readers of this weekly comment are not Millennials, it doesn't mean that sustainable, responsible and impact (SRI) investing is something they shouldn’t be interested in and ignore as an option.
SRI investing takes more than the bottom line into consideration and looks at environmental, social and corporate governance issues as a means to making both positive returns and societal impacts.
In a 2016 report on US Sustainable, Responsible and Impact Investing Trends, from the Forum for Sustainable and Responsible Investment, the total US-domiciled assets under management utilizing “SRI strategies grew from $6.57 trillion at the start of 2014 to $8.72 trillion at the start of 2016.”
In Canada, according to the 2016 Canadian Responsible Investment Trends Report compiled by the Responsible Investment Association (RIA), “assets being managed using one or more [responsible investing] strategies increased from $1.01 trillion at the end of 2013 to $1.5 trillion as of December 31, 2015.”
That’s a 49 per cent increase over a two-year period, and “represents 38 per cent of Canadian investment industry.”
Further to that, 80 per cent of the RIA’s survey respondents were expecting continued moderate or high levels of growth in 2017 and 2018, so it will be interesting to see how this metrics unfolds given political changes with our southern neighbour.
SRI investment strategies continue to expand as they seek to achieve long-term competitive financial returns, despite younger investors believing there to be financial sacrifices to impact investing.
The graphic below, created using data from Morningstar, however suggests these worries may be unfounded.
SRI equity funds, for example, “outperformed their benchmarks more than 60 per cent of the time at lower levels of risk in both Canada and the United States,” according to studies commissioned by OceanRock Investments and the Morgan Stanley Institute for Sustainable Investing.
In a RBC Global Asset Management (RBC GAM) article on SRI investing, it is suggested SRI investments do not result in lower returns for investors.
“This is an important finding because it provides support to individual investors and trustees of institutional funds that they can pursue a program of socially responsible investing with the expectation that investment returns will be similar to traditional investment options,” the RBC GAM article states.
Whether a Baby Boomer, Gen-X-er or Millennial investor, we each start in a unique place and move towards different objectives, but ultimately the underlying goal is probably the same; security.
We want to know that we are going to be O.K. financially, and it is reassuring to know that we don’t necessarily have to sacrifice our beliefs to achieve the performance we need to reach that goal.
The preceding should not be taken as investment advice. If you are interested in any of the sectors or themes discussed above, please contact Nick at 250-729-3200, to see if they are the right fit for you.