Social investing going mainstream, study concludes

Socially responsible investing (SRI) is expected to grow significantly over the next 10 years, to the point where it could become virtually mainstream, a recently released study concludes.

Although most of the growth will be driven by institutional investors, primarily pension funds and values-based groups, such as foundations and religious organizations, the retail market is also expected to expand due to increasing awareness of sustainability issues, says the study’s author, consultant Coro Strandberg.

Strandberg interviewed 45 SRI “thought leaders” for the study, including former Real Assets president Deb Abbey, Eugene Ellmen of the Social Investment Organization, Toronto SRI researcher Michael Jantzi and Bob Walker of Ethical Funds. She presented the results at a breakfast seminar in Toronto on Wednesday morning.

Many of those interviewed for the VanCity Credit Union sponsored study expressed the view that as many of 60% of the general public will become retail SRI investors by 2015 as social investing loses its niche status.

“We will witness a gradual change from SRI as an instrument of moral philosophy for moral investors to an instrument for mainstream investors who recognize that immoral behaviour of companies will hurt their investments,” Strandberg writes.

Still, some respondents believe that SRI will always be a niche product, driven by socially-conscious consumers, young people concerned about the environment, and retirees worried about the health of the planet and the future of their grandchildren.

And others expressed the view that this niche market has already developed as far as it can and that scenario won’t change, even 10 years down the road. “There was a minority view that SRI won’t amount to much,” Strandberg concedes.

Although the Vancouver-based consultant did not ask specific questions about the advisor channel, often viewed as an obstacle by SRI firms trying to reach the retail investors, she suggests that any developing sector would undoubtedly attract more advisors.

“Given that the [experts] I talked to generally saw growth, presumably advisors are going to start asking about [social investing].”

On the product side, Strandberg’s study predicts that in the future, every conventional financial offering will be matched by an SRI equivalent, including hedge funds, insurance products, income trusts and emerging markets investments.

And although some experts believe the big banks — which have dramatically increased their share of Canada’s mutual fund market over the past 10 years — will eventually get into SRI, Eugene Ellmen noted it hasn’t happened yet, and that’s a problem.

“Our nightmare scenario is that the banks will continue to ignore SRI,” he said in a question and answer session following Strandberg’s presentation. “It’s something we’re very concerned about.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com