People often ask me why I even talk about making a difference. You simply can’t make money and make a big difference they say. Well my portfolio proves you wrong. For years now I have been following the Principles of Responsible Investment.
You see investing along the principles of our collective world is in fact following the money.
Let’s walk through this.
Our world has changed. We feel record heat waves. We feel record rain falls and torrential storms. With these shifts in our weather, we spend more money on repairs, maintenance and insurance.
So when I see a change in my personal spending habits, I check with others and ask the same questions. We compare notes and then ask which companies are benefiting from our spending. Consistently I hear the same answer.
We focus our spending on quality not quantity. In a time when people are saving and paying off all debts, the simpler joys are the most important. So from my statistically inaccurate survey:
- quality food that is healthy and tastes great. We focus on quality not quantity.
- locally made so that it is fresher and I can support my neighbours. After all we all worked together to dig out after the storms and the floods.
- an online presence so I know that they have a smaller real estate footprint and those overhead costs are not passed along to me
- I am not buying from that store because they treat their employees terribly. Management is rude and condescending to the staff and are inflexible.
- I will not bank with that bank because they had a layoff last year in my town and 80% of the staff that was let go were in some way disabled. It was probably just a coincidence or was it?
So what does this really mean? Translated into an investment philosophy it means that many people invest responsibly and they do not even know it.
Responsible investment is the practice of involving your values into your investment decisions. That decision can be a consumer purchase, a place of employment or an actual investment choice.
For the people who choose quality over quantity, you represent the responsible investment tenet of investing for long term sustainable profit rather than the short term. You look for consistency and reliability. You don’t want to worry about surprises like dishonest accounting or serious environmental damage lawsuits against the company.
Companies that focus on paying a dividend to its shareholders and are committed to growth are usually committed to quality over quantity. But check the financial reports and do your due diligence. These are the types of solid companies that Responsible Investors choose.
When you choose to support your neighbours because they are there for you through the storms then you are investing your community which is another tenet of Responsible Investment. This builds local wealth which can be reinvested into schools, hospitals and services that maintain or raise the quality of life.
So what does this mean to my portfolio? I am focusing more on companies who invest in their communities. Where do you find that information? Well I walk in and ask. If the employees are not aware of any community involvement programs – odds are they do not exist. You can also find it on their corporate web site. It is usually listed under Corporate Social Responsibility or Sustainability.
For your portfolio, pick the ones that give back in your community or the communities in which you have family and loved ones. You will be building your loved ones’ quality of life.
Commercial real estate is expensive. Costs of insurance, heat, hydro, water are all climbing as our urban infrastructures break and need repair. These costs are passed along to the consumer. The cost of the purchased item is higher because in order to make a profit, the retailer must cover higher carrying costs. So stores that are moving online will be passing along less cost to the consumer.
What does this mean to my portfolio? I am lessening my exposure to traditional commercial real estate.
Labour practices are an important aspect of responsible investment. I never make a decision on an investment based on hearsay. There are many research firms that review labour practices. Corporate Knights is one, so is Sustainalytics. Another tool that I enjoy is
Negative screening is another way to participate in Responsible Investment. For whatever reason you do not want to invest in a company. You are uncomfortable with its business model, abhor its business processes or maybe you just don’t like them. If you have a disabled family member that was laid off and you do not want to be associated with that company then you have the right to make that choice. You can still have a balanced portfolio because there are many other solid choices in the same sector from which you can profit. The key to Responsible Investment is that it lets you put your money where your values are.
So how does one make Big Money and a Big Difference? You go with the flow. The flow of Big Money like pension funds, insurance companies and endowment funds are investing in Responsible Investment. They recognize that fiduciary responsibility means more than just making money and managing financial risk. It means making money with integrity and quality consistently over time.
Yours in Corporate Social Responsibility,
Cara MacMillan MBA