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Sustainable Investing with Ethical Funds

Sustainable Investing with Ethical Funds. Tracy M. Heath Regional Sales Manager Ontario & Atlantic Canada. SRI Around the World. US. UK. $2.16 trillion USD 11.3% of market. $403 billion USD 11% of market. Canada. Australia. $51 billion CDN 3.3% of market $10 billion retail.

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Sustainable Investing with Ethical Funds

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  1. Sustainable Investing with Ethical Funds Tracy M. Heath Regional Sales Manager Ontario & Atlantic Canada

  2. SRI Around the World US UK $2.16 trillion USD 11.3% of market $403 billion USD 11% of market Canada Australia $51 billion CDN 3.3% of market $10 billion retail $14.3 billion USD 3.2% of market Sources: SIF 2003, UK Social Investment Forum, Assirt , SIO 2003

  3. Is CSR important to Canadians? • 81% say companies should use their expertise to solve social problems • 79% say companies should work toward reducing human rights violations in the world • 72% say companies should help reduce the gap between rich and poor • 67% say companies should provide health services when operating in poor communities Source: 2002 Canadian CSR Monitor, Globescan

  4. Is CSR important to Canadians? • 89% say that their respect for a company increases when the CEO speaks in favour of SRI • 85% say they are interested in learning how companies try to be more socially responsible • 77% say that, as a consumer, they can make a difference in how responsibly a company behaves • 54% have punished a company seen as socially irresponsible Source: 2002 Canadian CSR Monitor, Globescan

  5. The Ethical Core Values • Respect for the Environment Progressive Environmental Practices • Respect for Stakeholders Progressive Stakeholder Relations • Respect for Human Rights & Safety Human Rights and Equal Opportunity Non Military Weapons Non Tobacco Non Nuclear

  6. Green List, eligible Green List & Focus List Red List, ineligible Corporate Sustainability Scorecard A Leaders B Fast Followers C Followers D Borderline ---------------------------------------------- E Non-compliant Corporate Sustainability Scorecard

  7. Key Performance Indicators • Each Key Result Areas consists of multiple Indicators • Environment; eg. emissions reductions • health & safety; eg. fatalities • community relations; eg. charitable donations • 55 to 130 Indicators depending on sector • KPIs refined annually Corporate Sustainability Scorecard

  8. Peer Group KRAs Financial Services International Mining Employee Relations 10% Enviro 10% Environment 20% Human Rights 20% Community Relations 30% Corporate Governance 30% Corporate Governance 10% Community Relations 20% Employee Relations 30% Health & Safety 20% Corporate Sustainability Scorecard

  9. Working With Portfolio Managers • Company lists sent to portfolio managers • Portfolio managers can buy Green List companies at will • Portfolio managers have three months to divest of companies new to the Red List Corporate Sustainability Scorecard

  10. Elements of the Program Shareholder Action Program

  11. Types of Shareholder Action • Shareholder dialogue • Structured negotiation • Shareholder resolution • Recommendation for company action • Proxy voting • Engage all companies in Funds

  12. Success Stories • IPSCO improves emissions disclosure • Bristol Myers Squibb phases out PVC • Morgan Stanley adopts enviro policy • Citigroup adopts the Equator Principles • Alcan embraces sustainability reporting Shareholder Action Program

  13. Focus List Themes

  14. 2005 Focus List - Canada Shareholder Action Program

  15. Why is this important to YOU?

  16. Facts • According to a poll by the Ideation group – “53% of Canadians are interested in ethical mutual funds” (Source: Moneysense.ca Sept. 2002) • 84% of Canadian investors believe the financial community should pay more attention to social and environmental issues. • 74% expect their advisors to incorporate this information into their investment decisions (Source: Globescan Survey 2003)

  17. Facts • 66% of investors have not had any discussions with their advisors • 13% said they brought it up to their advisor • 8% said their advisor brought SI investing up to them (Source: Globescan Survey 2003) • Only 3% of assets are invested in SRI funds

  18. Why not? • SRI seen to focus on negative screening • Resistance among investment advisors • Performance myth • MER myth • Lack of a simple and coherent vision & language

  19. MER Myth… • “Average MER for an SRI fund: 2.60 versus 2.54 for the average Canadian Mutual fund. (Source: Corporateknights.ca 2003) • Ethical Funds commitment is to be at or below the median. • Research has shown there is no penalty for investing in a socially responsible manner. (Source: Globe and Mail Feb 22, 2005)

  20. Performance Myth • Myth: SRI funds under-perform • Fact: S& P/TSX 60 Index 1 yr return : -15.7% All SRI Fund 1 yr return: -11.6% All fund 1 yr return: -15.2% All SRI fund 5 yr return: -1.9% All fund 5 yr return: -1.3% All SRI 10 yr return: 6.6% All fund 10 yr return: 6.5% (Source: Corporateknights.ca 2003)

  21. Who is a sustainable investor? • University educated professionals • Higher than average household income • At least 60% women • Average age between 35 and 59 • Often have personal reasons to avoid certain corporate sectors • Strong social, political, and religious views • Active members of cause-based institutions Source: Taddingstone, 2004

  22. The Ethical Funds Company • Leading socially responsible mutual fund company • Head office in Vancouver, BC • Canada’s largest family of SRI funds • 12 funds with $1.8 billion AUM • Owned by Canada’s credit union system

  23. Who are we? • Deliver investments portraying the values of and to the average Canadian. • Investing with both financial and social goals in mind. • Funds are sold through all distribution channels in Canada

  24. What is our vision? • Invest in companies on the basis of financial and sustainability performance • Encourage companies to adopt sustainability • Live by the same values • Provide competitive investment returns throughout a market cycle

  25. New Commitments • Earn consistent above-median return • Ensure Ethical Funds MERs are at or below-average • Support advisors through Regional Sales Managers across Canada

  26. Ethical Canadian Dividend Fund • Fund is managed by Greystone Investments – Regina • Five star fund • Won the Imagine Socially Responsible Award – 12/05 • 25 businesses in portfolio • Mid to Large cap

  27. Ethical Special Equity Fund • Fund is managed by QVGD – Calgary • 35 businesses in portfolio • Average market cap – 600 million

  28. Final thoughts • An SRI portfolio can look like any standard plan • Don’t have to give up returns to have an SRI portfolio • It’s up to advisors to position these alternatives with clients, to match their financial and value based needs. • Investors get more control over their money • Corporations are held more accountable • General health of our society might improve.

  29. We look forward to earning your business! WHOLESALER CONTACTS Diane Haggarty BC & AB – 604-787-1286 Shirley Babaluk SK & MB – 204-223-3045 Tracy Heath ON & Atlantic – 1-888-882-5590

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