Vancity and Inhance Top Annual SRI Fund Survey

Ethical Balanced Fund placed third, followed by the Ethical Advantage 2010 Fund and the Ethical Advantage 2030 Fund. Meritas Monthly Dividend and Income Fund ranked sixth, while RBC Jantzi Balanced Fund Series A, Meritas Balanced Portfolio Fund, Ethical Advantage 2015 Fund and Ethical Advantage 2040 Fund rounded out the top ten.

Corporate Knights crunched the numbers on 64 Canadian SRI funds, using a combination of social and performance scores as well as one-to-five “shield” scores, based on the following: Performance: 40%; Integration: 17%; Engagement: 15% Portfolio Turnover Rate: 10%; and Systemic: 8%.

Six Ethical Funds were given five shields, while Vancity and Inhance picked up one each. The relatively high performance weighting in Corporate Knight’s methodology partially explains why Ethical didn’t dominate the top ten.

The Ethical Special Equity Fund, which finished 20th in the overall rankings, had a dismal one-year return of -33.8%. By comparison, Vancity’s Circadian Monthly Income Fund lost 16.4% while the Inhance Monthly Income Fund Class A was off 16.5%.

Still, six of the top 10 SRI equity funds were from the Ethical family, thanks to their higher ranking scores in the social categories. Vancity and Inhance were the top two balanced funds, but also generated the highest scores overall as a result of their stronger performance numbers.

Corporate Knights added two new assessments to its survey this year: portfolio turnover rates and proxy voting records.

The average turnover rate of all funds surveyed was 28%. Ethical led the pack in this category: its Canadian Index Fund had a turnover rate of 0% while Ethical Advantage 2040 and Ethical Advantage 2015’s turnover rates were 1.0% and 1.5%, respectively.

Acuity Social Values Canadian Equity had the highest turnover rate at 128%, followed by Acuity Social Values Balanced Fund Class A at 104%.

“High turnover indicates that the fund manager may be missing the long-term value forest for the short-term trees,” says Corporate Knights’ managing editor Melissa Shin. “A whole slew of recent studies have shown that the majority of CEOs will sacrifice maximizing long-term economic value in order to avoid missing Wall Street’s quarterly expectations.”

On proxy voting, Ethical Funds, Inhance Investment Management and Investors Group each had a 100% record, “meaning that each time they had the opportunity to vote on an ESG-related shareholder resolution (that garnered at least 10% of shareholder support), they voted in favour of the resolution,” Corporate Knights says. Meritas Mutual Funds, which itself proposed several resolutions, had an ESG voting record of 90%. The survey notes that Ethical, Inhance and Meritas all publish their proxy voting guidelines.

This story originally appeared on srimonitor.blogspot.com, an SRI blog written by Ottawa writer/editor Doug Watt and Toronto financial advisor Sucheta Rajagopal.