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April 03, 2007

Canadian SRI Assets Leap to More Than $500 Billion Canadian
    by Anne Moore Odell

A new survey from the Social Investment Organization shows Canadian SRI assets ballooning thanks to increased institutional interest and new methodology. -- A biannual survey released late last month by the Social Investment Organization (SIO) reported that Canadian SRI assets have grown to more than CAN$500 billion. This marks a substantial leap from SIO’s last survey which estimated 2004 SRI assets at CAN$65.5 billion. The credit for this increase can be pinned on growing institutional interest in SRI practices and the inclusion of Broad SRI strategies in 2006’s asset total.

Visit the
Prospectus Ordering Center"Many people involved in SRI in Canada have mentioned to me lately that they feel that 2007 is going to be a real breakthrough year for our industry,” Eugene Ellmen, SIO’s Executive Director, told “The issue of climate change is one of the major factors driving the investment industry to look more closely at SRI. A recent federal report on corporate social responsibility and the mining industry is also bringing some attention to the role of Canadian companies in the developing world.”

“These kinds of issues are not going to go away, and pension funds and mutual funds are going to have to pay more attention to them in selecting and managing their investments, for both fiduciary and ethical reasons,” Ellmen added.

SIO’s study, “Canadian Socially Responsible Investment Review,” is based on a survey of money managers and community investment providers, with data gathered between September 2006 and January 2007. The study has been produced every two years since 2000. The study’s final asset estimates also include publicly available data on mutual and pension funds, and trusts.

The report breaks down the investments into Core and Broad SRI investments following the format of the groundbreaking 2006 European Social Investment Forum’s (EuroSIF) “European SRI Study.” However, SIO changed some of EuroSIF’s categories to fit a Canadian context. For example, EuroSIF put simple exclusions under Broad SRI while SIO placed simple exclusions under Core SRI. SIO also included community investing, which was not part of EuroSIF’s study, under Core SRI.

The survey finds CAN$57.4 billion in assets that use Core SRI strategies such as screening (combining traditional risk and return analysis with values-based criteria to select investments), community investment, and socially responsible lending.

Broad SRI strategies include CAN$446.2 billion in assets that use three main approaches: the evaluation of a company’s ESG performance to determine its relative under-weighting or over-weighting in a portfolio, corporate engagement and proxy voting on ESG issues; and sustainable venture capital.

SIO reports that as recently as 2004 there were very few assets invested according to Broad SRI strategies. Broad SRI assets include assets from the pension fund sector that are mainly composed of public pension funds.

“The increase in SRI assets in Canada is due mainly in the area of ESG corporate engagement and proxy voting. In the last two years a number of very large, public pension funds in Canada have adopted SRI policies,” said Ellman. “They have signed on to the UN Principles for Responsible Investment, and as part of their commitment under UN PRI, have committed to engage and vote their proxies on ESG factors.”

SIO is currently urging pension funds to publicly disclose their engagement activities, as well as their proxy voting.

One of the pension funds SIO points to for adopting ESG engagement strategies is Caisse de dépôt et placement du Québec, one of Canada’s largest institutional fund managers based in Montreal, Quebec. Ginette Depelteau, Senior Vice-President, Policies and Compliance for Caisse told "Caisse de dépôt et placement du Québec considers ESG issues in its activities mainly for two reasons: the risks ESG issues represent in investments and the pursuit of sustainable economic development."

Baitrente, headquartered in Montreal, Quebec, is a labor-sponsored Canadian pension fund that adopted a responsible investment policy in January 2005, outlining ESG risks they would like the companies in their portfolios to avoid.

“We do think that engaging companies is an excellent way to promote good governance and sound environmental and social practices” said Laetitia Tankwe, Extra Financial Risks Manager. “In addition to this ‘bottom up’ strategy, we are very involved in ‘top down’ strategies such as the Enhanced Analytics Initiative (EAI) and the Principles for Responsible Investment. We think that those kinds of initiatives send a clear signal that things are changing and that ESG is no longer a matter of SRI and ethics, but a new mainstream way of doing business for everybody’s long term interest.”

The conclusion of SIO’s report asked if the inclusion of Broad SRI strategies in the total assets of SRI asset represents a real increase in the SRI market. The report concludes that it is not fair to compare Core and Broad SRI strategies. However, the authors believe that the huge growth in Broad SRI is a “breakthrough in the understanding of environmental, social and governance issues by the investment community.”

Acuity Funds Ltd., Alterna Savings, Desjardins Trust, Meritas Mutual Funds and The Ethical Funds Company sponsored the study. The non-profit SIO is the nationwide association for the Canadian SRI industry, representing more than 400 members that include mutual funds, financial institutions, investment advisors, managers and consultants, and NGOs and others interested in SRI.

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