Socially Responsible Investing (SRI)
Investing responsibly doesn’t have to come at the expense of performance
The IA Clarington Inhance SRI Funds, managed by SRI pioneer Vancity Investment Management Ltd. (VCIM), can help you meet your wealth-building goals in a socially responsible and environmentally sustainable way.
VCIM uses a three-pronged approach to responsible investing:
To identify potential investments, the VCIM team assesses companies based on seven ESG criteria viewed through the eyes of four key stakeholders:
3 Employee relations
5 Community relations
6 Environmental performance
7 Human rights
The ESG screening process has two key dimensions:
- Negative screening
- Positive screening
Negative screening means eliminating from consideration all companies that fail to meet VCIM’s stringent ESG criteria. Examples include companies whose primary line of business involves the following:
Positive screening means actively seeking out companies with a strong commitment to high ESG standards. This involves screening on the basis of the seven ESG criteria outlined above as well as the United Nations’ Sustainable Development Goals (UN SDGs).
Bringing all these elements together, VCIM’s ESG screening process looks like this:
Fundamental financial analysis
To ensure the funds offer investors strong potential for long-term wealth creation, the VCIM team employs a fundamental, bottom-up approach to assessing prospective holdings.
The screening process incorporates an in-depth checklist covering more than 100 criteria. To be considered for inclusion in the funds, a company must have a strong competitive advantage and be led by a management team with an exceptional track record. The company should also exhibit strength across a wide range of metrics, including:
- Relative valuation multiples (e.g., price-to-earnings ratio)
- Profitability ratios (e.g., return on equity, return on invested capital)
- Earnings growth
- Free cash flow
Only securities that satisfy the stringent requirements of both the ESG and fundamental analysis teams are eligible for inclusion in the IA Clarington Inhance SRI Funds. The end result of this rigorous, multi-stage process is a portfolio of attractively valued, responsible investment opportunities with excellent potential for strong risk-adjusted outperformance.
VCIM continuously monitors portfolio holdings to ensure that companies maintain their commitment to high ESG standards. When a company appears to deviate from these standards, the VCIM team actively engages with management, either one-on-one or in concert with other shareholders or stakeholders. VCIM also engages with industry leaders to encourage them to elevate and expand their commitment to ESG. The goal is to create a positive ripple effect across the broader industry.
Detailed examples of VCIM’s engagement initiatives can be found in the Dialogue to Action report, available in the Support Materials section on the right-hand side of this page.
Options for any investor need
The IA Clarington Inhance SRI suite consists of five standalone mutual funds and five all-in-one portfolio solutions: