Building a Culture of Socially Responsible Investment

Summary

The Caisse d’économie solidaire (Caisse), brings together 11 700 members, of which 2700 associations and cooperatives coming from the labour, cooperative, community and cultural sectors. With an annual sales figure of over 1 billion dollars as of September, 2009, this credit union is among the largest of the 513 credit unions that make up the Desjardins network.

With a special expertise on issues of socially responsible investment (SRI), the Caisse finds that more and more investors are asking questions on the way in which their savings are being used. It is known, for example, that 70 % of Canadians would like to be better informed on SRI, the existing funds and the social and environmental values that are taken into account. The Caisse is conscious of the fact that investors are looking to evaluate the relevance and effectiveness of investing in SRI funds.

Colette Harvey, Principle Advisor on Socially Responsible Finance at the Caisse, is proud to say that this special expertise has been building since 2003 when the Caisse decided to include in its mission “to advise citizens in their interests to manage their personal finances in a way that is both judicious and socially responsible“. While the Caisse was already well anchored in responsible finance, it undertook a number of measures to develop a culture of SRI within the institution. These measures include: a regularly updated guidebook on socially responsible investing, a Responsible Investor Test, and unique investment product offerings, in addition, the financial advisors at the Caisse are equipped to judiciously advise members on how to invest their savings in line with their values and their financial needs.

Implementation

SRI TRAINING GUIDE

It was decided that human and financial resources would be devoted to develop an internal expertise on SRI. Two years later, in 2005, the first paper Guide on Socially Responsible Finance was published. It was designed to be used by the entire personnel, regardless of the position help at the Caisse. The Guide serves as the base for all employee training. A second version of the guide came out in 2006 and an electronic version should be ready for dissemination in 2010.
Separated into 6 sections, the Guide covers: the relevance, history and definition of responsible finance, the distinct characteristics of socially responsible investors with an interview guide, a series of sheets on the various SRI products available, the financial strength of the Caisse including its networks and partners, a number of unique tools implemented by the Caisse, and useful links to learn more.

Training days were planned for the entire personnel. While the training for all employees gives a solid understand of SRI, the financial advisors needed to know specifics on the SRI products available on the market. Financial advisors had to learn how to work with these products and had to be prepared to answer numerous challenging questions that members would likely ask.

SRI TRAINING

Using the Guide and other tools, the Caisse has devoted many hours to training of employees. In 2006 and 2007 at least 800 hours were devoted to internal training; in 2008, 150 hours were devoted to internal training, and by June 30 2009, 92 hours of internal training had already be given.
After having insured solid intergration of SRI issues internally, the Caisse begun preparing conferences destined to the wider community. SRI conferences for the general public begun in 2007 and have become more and more regular in 2008 and 2009.

SRI PRODUCT CREATION/OFFERING

In addition to being informed and equipped to advise on socially responsible mutual funds available on the market, the Caisse also offers certain financial products that are particular to the Caisse and respond to specifically to the demand of socially responsible clients/members. These products include a Social Returns Fund that is more transparent than most, a Solidarity Savings Fund, a mortgage with added environmental value (hypothÉco), as well as loans for eco-friendly transportation options (ecoAuto).

THE ETHICAL INVESTOR TEST

In December 2008 the Caisse developed the first Ethical Investor Test. This test helps clients/members and the Caisse financial advisors to orient client savings in line with their values, all while respecting their financial needs. The test was developed in response to client/member demand for more information on socially responsible investment.

This Test was launched during Registered Retirement Savings Program (RRSP) period in Canada in 2009, and launched in the form of a contest, encouraging people to complete the test online. Completion of the online test made participants eligible for valuable, ethical prizes including a family vacation of 2 nights at the Centre de villégiature Jouvence (www.jouvence.com). The context generated significant interest in the Caisse’s services (see Results below).

"A portfolio in your own image“

To help advisors to construct a portfolio that appropriately reflects the values registered in the Ethical Investor Test, and to show members the SRI value of their own portfolio, the “A portfolio in your own image“ program was created. The program maps out member portfolios according to their SRI value in the form of a clear graph. For example, the graph illustrates the percentage of the member’s portfolio that is invested in environmental funds, the percentage that backs shareholder engagement and more aggressive SRI strategies, and the percentage that is in solidarity or community investment.

Challenges

Initially, the challenge was to justify adding a whole new culture to individual member services of the credit union when the institution had already distinguished itself with it’s more significant organizational members, by choosing to focus on social economy enterprises, cultural organizations and labour organizations. In the end, the socially responsible investment training was accepted as yet another special point of differentiation in the individual financial services market.
Finding up-to-date, credible information of SRI, and especially on the products available on the market, was not easy. Establishing a contact at the different mutual funds that could adequately respond to rigorous questions about the responsible investment strategies took some time. The Caisse hired external experts in the field to help them develop solid materials on the industry.

Once the guidebook had been created and made available to all, it was discovered that the guidebook wasn’t being consulted. Applied exercises were introduced, and employees started to better grasp and integrate the material.

Putting all the information in an accessible format was also a challenge. User-friendly selection grids were created to help advisors (and members) compare products across a variety of common characteristics (like past financial performance and social/environmental value strategies).

Responding to the interest that was generated by the Socially Responsible Investor Test was a challenge. Following up with all the people who had indicated an interest in meeting with a financial advisor and/or attending a conference on SRI took some additional time.

All in all, the biggest challenge has been adding this whole new level of comprehensive information to an already heavy workload and knowledge base. The Caisse believes the effort has, and will continue to pay off.

Social and Environmental Benefits

Among the social and environmental benefits that have come from the SRI project at the Caisse, it is important to underline the awareness raising of employees, members of the wider Quebec public on issues of SRI. The practice has also incited citizens to consider the social, environmental and governance impacts of their investment choices.

Results

The Caisse thought it a good idea to created performance indicators to help monitor it’s own performance with respect to integrating SRI solutions. Growth proportions must reflect the real increase in SRI product consumption, and not simply the increased or decreased market value. While the performance indicators do not hold the same rigour of individual share performance measures, it was determined that comparing the percentages of sales of SRI mutual funds with other mutual funds offered on the market constitutes a fair performance indicator.

The evolution of the proportion of socially responsible funds held by members of the Caisse relative to members entire mutual fund holdings is as follows: December 2006 = 7 %; December 2007 = 13 %; December 2008 = 12 %, and June 2009 = 18 %. This signifies that in June 2009, the members of the Caisse held, on average, 18% of SRI funds in their portfolio of securities.

Ethical Investor Test Contest that ran from December 2008 until June 2009 incited the following participation: 432 people participated in the contest, and among those participants, 113 signed up for conferences, 107 asked to meet with a financial advisor
And 241 signed up for the Caisses’ electronic bulletin.