Is it possible to invest for retirement—without supporting companies you don’t approve of?
When Kermit the Frog said, “It’s not easy being green,” he wasn’t talking about investing, but he might as well have been. It’s a complicated topic to cover on just one page, especially when our readership runs the gamut from financial experts to people who don’t invest for the future because they need all their money in the present.
This story is for those of us somewhere in the middle. We try to put away at least some money for retirement and our kids’ education on a regular basis, in a place where it will be reasonably safe, and maybe even grow a bit. For many of us, this means we invest in a mutual fund.
A mutual fund is a pool of investments that usually includes stocks, bonds and other securities. Buying shares in one is like buying a tiny portion of a lot of different companies: some of these will increase in value and some will fall, but the idea is that over the long run, you’ll make money.
Most of us, I suspect, pick a mutual fund that looks halfway decent (many companies call these “balanced” or “balanced growth” funds), set up a regular automatic payment into it, and hope for the best.
This was how I used to roll. However, this past summer, I decided to dig into what I was investing in. As I read the list of companies in my run-of-the-mill mutual fund, I kept exclaiming, “Oh my gosh, I hate these guys!” Turns out I own teeny-tiny pieces of many companies that I don’t like even one teeny-tiny bit.
When I started looking into this (by Googling “investment products for people who no longer believe in capitalism”) I learned it’s becoming easier for people to invest in ways that match their personal beliefs. If this notion interests you, here are a few ideas to consider—and maybe ask your mutual fund provider about.
Simply dump the funds that don’t align with your values. For example, in 2021, the University of Victoria began divesting $256 million from its Working Capital Fund so it would no longer support fossil fuel extraction. You can do the same by investing in a fund that’s more socially responsible.
There isn’t a universal definition of socially responsible investing, but it often encompasses at least one of the two ideas below.
Maybe you don’t want to invest in tobacco, marijuana, weapons, pornography, or companies that test on animals. Or you don’t want to support oil and gas companies (or the banks that fund these companies) because you’re concerned about climate change. Each of these beliefs is a value judgement and only you can decide what is most important to you. Unfortunately, because it’s highly unlikely you’ll ever find a mutual fund that holds only the companies that you totally approve of, you may have to figure out your own deal-breakers and invest accordingly.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG)
This increasingly popular concept factors in financial returns, but also looks at how businesses operate in terms of the environment, stakeholders/employees, and how effective and ethical their boards are. The idea behind this is that a company that pays attention to these kinds of principles will probably also make its investors money.
There’s one final thing to consider. Even if you don’t want to invest in (for example) oil and gas, there’s a good chance that your bank is doing exactly that. In December 2020, Global News reported that “a recent study from the Rainforest Action Network placed RBC, TD and Scotiabank in the global Top 10 for financing fossil fuels, providing more than $89 billion to oil and gas companies in 2019 alone.” This includes controversial projects like the Coastal GasLink pipeline. The solution to this one can be quite simple: switch to a credit union. Credit unions are community-based, not-for-profit financial cooperatives that provide most of the same services and security as banks.
I hope this story has planted a little seed in your mind about how your money can help keep the planet growing—and not just some corporation’s bottom line. If you decide to investigate your own investments, happy digging!