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Money for change: Sustainable investing hits the big time

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New numbers in Canada and the United States show that sustainable investing is no longer a niche trend, but rather has become a powerful force in money management that won’t be ignored.

A new report from the Forum on Sustainable and Responsible Investment in the U.S. recently calculated that almost $12 trillion US is currently invested in the country based on the principles of ESG — environmental, social and governance issues. 

That’s an increase of 38 per cent from 2016’s level and six times what it was barely two decades ago.

Canadian numbers show a similar trajectory. According to the recent annual report of the Responsible Investment Association (RIA), at the end of last year Canada had more than $2.1 trillion Cdn invested in assets based on at least one ESG principle. That’s more than half of all the assets under professional management, and it’s the first time the figure has tipped over the 50 per cent threshold.

What was once a niche part of the investment community has hit the mainstream to become a major determining factor when investors choose where to park their money. 

“Finally it feels like the world is catching up to me,” says Tim Nash, a Toronto-based fee-for-service financial planner and investment coach. Nash works with individual investors to help their create their portfolios, and he says that sustainability is one of the biggest long-term issues he’s warned investors to pay attention to for years.

Technically, the broad concept of sustainable investing runs the gamut of everything from environmental factors, to social issues such as fair labour practices to governance questions surrounding diversity and female representation. But Nash says, with environmental issues specifically, he sometimes has to deal with a negative bias where some people think that anything “green” is somehow by definition going to have a worse financial performance.

“If it’s a cleaning agent, they want the harsh chemicals; if it’s an electric car, they assume it doesn’t go as far; and with an investment they just assume performance is going to be worse,” he says, “against all evidence to the contrary.”

Retail investors may have been slow to be convinced, but major institutional money has been pouring money into the space for years. With $6 billion US invested worldwide, Blackrock is the biggest single money manager in the world, and Tariq Fancy, the company’s chief investment officer for sustainable investing, says investments in things like renewable energy are going ahead now, not just to save the world, but make money in the long run.

Sustainable investing had grown to more than $12 trillion US under management last year. (Rob Easton/CBC)

“The old way of looking at it was if you want to do sustainable investing you will lose some return, but the industry is realizing that there’s no tradeoff,” he says. “Looking at sustainability considerations actually does not entail losing return and potentially even can improve it.”

Fancy says a big reason for the growth is that the industry has only recently discovered reliable metrics of monitoring sustainability issues. “There’s an old saying that whatever isn’t measured isn’t managed,” he says, which is why the financial community only truly accepts something once there is data to track it.

“Ten years ago you didn’t think about how many steps you were taking because it wasn’t easy to measure,” he says. “Today you’re wearing a Fitbit.”

The data is so compelling that Canada’s national pension plan is getting in on the action. Because the Canada Pension Plan Investment Board is mandated to invest funds to grow and last decades into the future, the appeal of sustainable investing isn’t just to boost returns today, but make sure that money will exist for the long haul.

“Our job is to maximize returns without risk of loss for generations to come,” says Ben Lambert, the CPP’s interim head of sustainable investing. “And companies that do well on these sustainability issues extend their corporate life and are more likely to create value over the long term.”

That’s why the CPPIB has earmarked $3 billion Cdn toward renewable investing alone in the past two years, on top of issuing a $1.5 billion Cdn green bond this summer, to raise even more money that is earmarked to be invested in alternative energy projects.

“It’s a win-win situation,” he says. “It’s about doing the right thing and generating returns.”

According to the RIA, 88 per cent of money managers listed a desire to minimize risk as their No. 1 reason for investing sustainabley. More than three quarters said improving returns was the main impetus.

Dustin Lanz, CEO of the Toronto-based group, agrees the sustainable investing trend has hit something of a tipping point. The main motivation, he says, is a desire from investors to minimize the risks to which they are exposed. Those risks may not always show up in the places investors traditionally look for them, but they exist.

Dustyn Lanz is the CEO of the Responsible Investment Association. (Dustyn Lanz)

“Risks can be identifiable by investors,” he says, “but you can’t just find them on the financial statement or balance sheet

If the current trend continues, it’s not hard to imagine a future in which sustainability is not some fringe fad, but a constant investment consideration just like any other.

To illustrate the point, Fancy notes that many investing trends were niche at first, before being so adopted by the mainstream that they became impossible to ignore.

Sixty years ago, the world didn’t have standardized accounting standards, but now investors can’t imagine a world without them, he notes. And as recently as 30 years ago, the concept of diversifying your assets wasn’t universally accepted as being the smart thing to do. The same thing is happening now with sustainability, he argues.

“In 20 years, people won’t think about this as sustainable investing,” he says, “they’ll just think of it as investing.”

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Real Estate

7 Tips For First-Time Home Buyers In Calgary

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Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market

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The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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Real Estate

10 Tips For First-Time Home Buyers

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Buying a home for the first time is exciting and a commitment to the future. It’s often challenging, too, and the process requires a lot of steps, many of which can be tricky to navigate as a first-time home buyer.

What are some things you should keep in mind as a first-time home buyer?

First-Time Home Buyer Tips

Here are 10 tips to keep in mind as you begin your journey toward homeownership.

1. Have Your Finances in Order

It’s wise to begin saving as early as possible once you’ve made the decision to purchase a house. You’ll need to consider the down payment, closing costs (which often range from 2% to 5% of the down payment), as well as move-in expenses.

You also need to understand the other costs of homeownership, such as mortgage insurance. property taxes, utilities, homeowner’s insurance, and more.

2. How Much Can You Afford?

Knowing how much you can realistically afford in a home is another important financial consideration. Look for the home of your dreams that fits your budget.

One way to avoid future financial stress is to set a price range for your home that fits your budget, and then staying within that range. Going through the preapproval process will help you understand what price range is realistic for your budget.

3. Make Sure Your Credit is Good

Another thing to keep in mind as a first-time home buyer is your credit score because it determines whether you qualify for a mortgage and affects the interest rate that lenders offer. 

You can check your credit score from the three credit bureaus – Experian, Equifax, and TransUnion.

This is another good reason for getting preapproved before you start your search. Learn more about the preapproval process and your credit score.

4. Choose The Right Real Estate Agent

A good real estate agent guides you through the process every step of the way. He or she will help you find a home that fits your needs, help you through the financial processes, and help ease any first-time buyer anxiety you may have.

Interview several agents and request references.

5. Research Mortgage Options

A variety of mortgages are available, including conventional mortgages – which are guaranteed by the government – FHA loans, USDA loans, and VA loans (for veterans).

You’ll also have options regarding the mortgage term. A 30-year fixed-rate mortgage is popular among many homebuyers and has an interest rate that doesn’t change over the course of the loan. A 15-year loan usually has a lower interest rate but monthly payments are larger.

6. Talk to Multiple Lenders

It’s worth your time to talk to several lenders and banks before you accept a mortgage offer. The more you shop around, the better deal you’re liable to get – and it may save you thousands of dollars.

7. Get Preapproved First

Getting a mortgage preapproval (in the form of a letter) before you begin hunting for homes is something else to put on your checklist. A lender’s preapproval letter states exactly how much loan money you can get.

Learn more about the preapproval process and how preapproval provides you with a significant competitive advantage in our article How Preapproval Gives You Home Buying Power.

8. Pick the Right House and Neighborhood

Make sure to weigh the pros and cons of the different types of homes based on your budget, lifestyle, etc. Would a condominium or townhome fit your needs better than a house? What type of neighborhood appeals to you?

9. List Your Needs and Must-Haves

The home you purchase should have as many of the features you prefer as possible. List your needs in order of priority; some things may be non-negotiable to you personally.

10. Hire an Inspector

Hiring an inspector is another crucial step in the home buying process. An inspector will tell you about existing or potential problems with the home, and also what’s in good order. You can learn more about home inspections and how to find a home inspector through the American Society of Home Inspectors website.

Buying a home for the first time is a challenge, but it’s one you can handle with the right planning and preparation.

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