Fact Sheet #5:  Does Social Investment Lead to Social Change?

What evidence exists that shows that investment tied to social and environmental goals changes company behaviour?

Socially Responsible Investing (SRI) has been perceived primarily as a negative approach to investing. That is, many see it as the process of eliminating “bad” companies from a portfolio.  However, SRI includes more activist approaches to social responsibility that use economic and political interventions in an attempt to make economic practices more democratic and workplaces more humane.

• Social investors have begun over the last decade to influence company behaviour.  Examples from the last few years include the successful campaigns to protect old-growth temperate rainforests in British Columbia.  Partially as a result of pressure from a coalition of investors (including Canadian-based Ethical Funds), Home Depot agreed to phase out its purchases of wood products from old-growth forests. As one of the largest consumers of wood products in North America, Home Depot has agreed to source wood products from forests certified by the international Forestry Stewardship Council.

• On sweatshop and labour issues, shareholder proposals have asked Sears Canada and HBC to comply with the International Labour Organization’s labour standards and report on compliance to shareholders. Though the proposals failed to pass, they generated enough attention that management at HBC has agreed to examine the issue.

• Predatory Lending. A shareholder resolution prompted Citigroup - one of the biggest financial services corporations in North America - to take steps to improve the way it serves low-income communities. In late 2000, a coalition of church groups and other socially responsible investment institutions asked Citigroup to develop policies to ensure that no employee or broker engages in predatory lending practices. *

* Predatory lending targets low-income borrowers who don't qualify for prime rates and involves excessive fees and interest rates, hidden costs, unnecessary insurance, and other abusive practices. Predatory lending has been blamed for stripping the equity from the homes of people in low-income communities.