Thursday, May 5, 2011

SRI assets hold steady

Socially responsible assets in Canada dropped marginally to $531 billion as of June 30, 2010, compared with $579 billion in 2008, according to the biennial SRI review, released today by the Social Investment Organization. However, SRI still represents about one-fifth of total Canadian assets under management, about the same level as 2008.

“SRI has held steady, showing resilience in the face of the unprecedented turmoil in the capital markets brought about by the credit crisis of 2008,” the survey notes. “SRI continues to gain traction as a reliable mainstream tool for value enhancement, risk management and the realization of social and environmental goals.”

“I think the numbers are encouraging,” said SIO executive director Eugene Ellmen in an interview. “The assets are down somewhat, but the overall market share is about the same, about 20%. Where the significant decline in the numbers came was on the pension fund side, and that’s purely a result of the market declines in 2008.”

“We’ve maintained our market share through the decline, markets have come back nicely in 2011 and I think that SRI is poised for growth in the future.”

Assets managed by pension funds make up the bulk of SRI assets in Canada at $453 billion, about 85% of the total. That’s a drop from $513 billion in 2008.

The survey notes that Canada’s major, publicly-managed pension funds – such as the Canada Pension Plan Investment Board, OMERS and OPSEU Pension Trust – have been early adopters of responsible investment strategies.

SRI retail funds managed on behalf of individual clients gained some ground, rising to $25 billion compared with $22 billion in 2008. SRI mutual funds make up about half the total in this category, at $12.4 billion. Retail funds represent about 5% of total SRI assets in Canada.

“SRI mutual funds have had some challenges over the last couple of years, but they have bounced back nicely in 2011, and I think they are poised to grow as advisors learn more about socially responsible investment,” Ellmen says.

Renewable energy income trusts, which invest in a pool of investments focused on the production of clean energy, have grown to nearly $13 billion. There are some fundamental reasons for that, Ellmen explains, such as such as the rising price of oil, which has created opportunities in other forms of renewable energy. At the same time, there have been some key policy changes, such as the Feed-in Tariff program under the Ontario Energy Act.

Impact investments, such as community loan funds and social venture capital, represent $4.5 billion, or about 0.8% of total SRI numbers. It’s a small, but fast-growing segment of SRI, the report notes.

“I think impact investing has quite an exciting future because local communities are looking for ways to use investment capital to improve their economies and to create opportunities for disadvantaged people”, Ellmen says. “Social finance is growing tremendously as an alternative to traditional ways of funding non profit organizations and social services. There’s a lot of attention in this area.”

The review also found that asset management firms investing funds under SRI mandates grew to $46 billion, about 9% of the total.

Click here to access the full SRI Review.

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