The returns of responsible investment (RI) funds are lower than those of traditional funds.
Myths die hard, particularly this one, but despite somewhat difficult beginnings, the performance of RI mutual funds has been more than convincing in recent years:
- According to data provided to the Responsible Investment Association by Fundata Canada Inc. for its quarterly report of June 30, 2018, a majority of RI funds outperformed their average asset class returns, net of fees.1
- These data also show that nearly two-thirds of RI funds outperformed their respective asset classes over three-year, five-year, and 10-year periods.1
- According to a study conducted by Tessa Hebb of Carleton University in Ottawa,2 RI mutual funds in Canada outperformed their respective benchmarks 63% of the time and, in the case of balanced funds and fixed-income funds, 67% of the time. Similar findings were made in the U.S. by the New York-based Morgan Stanley Institute for Sustainable Investing.3
- In Canada, the Jantzi Social Index has outperformed the S&P/ TSX 60 and the S&P/TSX Composite indices1 since its inception in 2000.
- If we expand the comparison to include the returns of companies with a high level of ESG integration, it has outperformed the S&P 500 by 45 basis points since its inception in 1990.3
RI funds compare very well with traditional funds and outperform them in most cases. Although investing in RI funds is first a question of personal values, the growing popularity of these funds and the quality of the companies they comprise disprove the old belief that to make “ethical” choices you have to sacrifice returns. Integrating RI funds into your portfolio is now part of your diversification strategy, which aims to improve your long-term return while better protecting your assets.
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2HEBB, Dr. Tessa, Canadian SRI Mutual Funds Risk/Return Characteristics, Carleton Centre for Community Innovation, Carleton University, 2015. https://carleton.ca/3ci/wp-content/uploads/SRI-Funds-Risk-and-Return-Analysis-final-22052015.pdf
3Morgan Stanley Institute for Sustainable Investing, Sustainable Reality: Understanding the Performance of Sustainable Investment Strategies, March 2015. https://www.morganstanley.com/