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January 17, 2013

Sustainable Investment Assets Continue Growth in Canada
    by Robert Kropp

The biennial report by the Social Investment Organization of Canada reveals that sustainable assets under management now represent 20% of the total. -- The Social Investment Organization (SIO) released its biennial Canadian Socially Responsible Investment Review today, and as with the findings of other sustainable investment forums, the report notes continued growth in virtually every major market segment.

Since the release of SIO's 2010 report, "markets have improved, with S&P/TSX Composite Index rising 5.8% and total assets under management growing by 9%," the new report states. "At the same time, total SRI assets have grown by 16%, with gains among institutional asset owners and managers, in the retail industry, and in impact investing." With assets of $601 billion, sustainable investing in Canada now comprises 20% of all assets under management by the financial industry there. $532.7 billion of the sustainable assets, or 89% of the total, are held by pension funds.

Three strategies prevail in the Canadian sustainable investment industry: corporate engagement and shareowner action; negative screening; and integration of environmental, social, and corporate governance (ESG) factors into traditional financial analysis. For a pension fund to be considered sustainable, it must have detailed proxy voting guidelines addressing ESG issues and evidence that it votes its proxies according to the guidelines

"The dominant strategy employed by asset managers on behalf of their clients is negative/exclusionary screening," the report states. "This is partly a function of the large number of assets managed on behalf of religious institutional clients, but it is also partly because of the size of some large funds with single-issue screens such as tobacco."

The only area of sustainable investment experiencing a decline since the 2010 report is venture capital, whose $1.3 billion in investment in 2012 represented a 7% decline. The decline was due to a number of factors, according to the report, "including historically low natural gas prices, European and American cleantech subsidies receding from historic levels, and low-cost competition from China."

"We believe that there is still a great deal of potential growth yet to be realized," the report's authors concluded. "There is a clear opportunity for our industry to demonstrate that doing the right thing has never been more clearly linked to doing well."

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