Important information: A potential Canada Post service disruption could take place within the coming weeks.

Skip to main content

Water Damage: What Am I Covered For?

Stories about weather-related property damage have become more common in recent years. Snowmelt and frozen rain, coupled with frozen ground, has led to widespread overland flooding, seepage, and sewer backups.

Over the past decade, the Insurance Bureau of Canada (IBC) calculates that extreme weather events caused at least $1 billion in losses. In 2020 alone, the IBC reports that January’s record-breaking high temperatures in southern Ontario and Quebec already caused more than $95 million in damages.1

When it comes to water damage coverage most home insurance policies provide some coverage to help protect your family and home from water-related damages.

Understanding Insurance Terminology

Before we examine the coverage, let’s take a minute to review some of those terms in your insurance policy that you’ve heard but may not understand what they mean.

  • Seepage: when water flows or passes slowly over time through fine pores or an opening – like your basement walls or windows.
  • Water escape: when water, that’s flowing through the pipes in your home, gets out of the pipes in a manner that it’s not supposed to – like a burst pipe.
  • Sewer system: pipes that carry waste and storm water.
  • Watermains: pipes underground that bring fresh, clean drinking water to your house.
  • Sudden and accidental:
    • Sudden: something that happens unexpectedly without warning and has not been ongoing.
    • Accidental: unintentional, not on purpose.

Common Home Insurance Water Damage Coverage

Weather-related events aren’t the only possible causes of water damage; leaks and burst pipes are also common causes of damage to homes, so it’s important to know what your policy covers.

Home insurance policies in Canada typically offer water damage coverage caused by sudden and accidental water escape from the following:

  • Eavestroughs, downspouts or ice dams
  • Watermain breaks
  • Water or steam from plumbing, heating, or air conditioning systems
  • Overflow from domestic appliances or water containers like your hot water tank or washing machine
  • Swimming pools or their attachments
  • Water coming through an opening created suddenly and accidentally by another covered cause

Additional Coverage Options

If you’re concerned about water damage and how it might result in expensive repair costs, you may want to consider purchasing additional coverage. For example, you might add sewer back up coverage, which provides coverage for damage caused by water getting into your home through a backed-up sewer system. This covers losses due to sewers overflowing and sewage backing up through the drains into your home.

Given the increase in flooding over the past decade, you may also want to consider overland water insurance, commonly known as flood insurance. This helps protect your home and contents against water damage due to lake or river overflow, heavy rainfall accumulation, and rapid snow melt that’s too much for drainage systems to handle.

Check with your home insurance provider to see if adding this insurance is an option if you live in a flood prone area.

What Water Incidents are NOT Covered by Insurance?

The key thing to note with water damage under a home insurance policy is that the incidents must be sudden and accidental. A typical home insurance policy will not cover damage due to leaks or seepage over time.

It is also important to note that coverage is for the damage caused by the water and not the initial cause itself. For example, if your pipe bursts and damages your carpet, the damage to your carpet is covered, however the cost to replace your pipes might not be. This is because the damage to the pipe would most likely be due to deterioration, faulty workmanship, or something else that is not covered by your policy.

There are some water damage losses that would not be covered under your home insurance policy unless additional coverage is purchased.

  • Backup, escape or overflow water from sump pumps, septic tanks, weeping tiles, or French drains. (ask an advisor how sewer back up can help)
  • Flood, ground water, rising water tables. (ask an advisor how overland water coverage can help)

Other water damage losses not typically covered by standard homeowners insurance, also known as exclusions, include:

  • Tides and tidal waves
  • Spray, waves, storm surges
  • Ice
  • Water-born objects like boats or debris
  • Seepage
  • Escape of water from an appliance or a container outside of your home caused by freezing
  • Damage due to freezing of plumbing, heating, sprinklers, air conditioning or domestic appliance in an unheated area of your home
  • Water damage to a home that has been vacant for 30 days or more

What You Can Do

By taking action now to protect yourself, you can reduce the odds of water damage hurting your home and your wallet. Ensure you have the insurance protection best suited to your home and region. Check out these tips to help you prevent water damage to your home.

Sources:

1.January storm caused over $95 million in insured damage. IBC. February 18, 2020

Great Rates and Expert Advice on Home Insurance

Get a free online quote* for coverage to protect you, your property, and your belongings from the unexpected.

Learn More

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Share This Article

Topics:

Home Maintenance Winter Weather

Read This Next

Standard insurance, like homeowner’s insurance, may provide enough coverage for most Canadians – but not all. In fact, the majority of affluent Canadians are actually underinsured. They’ve got insurance that isn’t designed to cover most luxury properties and other valuable assets.

What is Private Insurance?

When your business, professional and private assets grow, so do your risks. Private insurance policies are uniquely designed to address those risks by offering specialized coverage traditional policies do not. Your dedicated specialist can easily conduct a Personal Risk Assessment to help identify gaps in your insurance coverage — especially for items like vacation properties, collectibles, and even your home wine cellar.

Most Canadians don’t realize they’ve outgrown their insurance policies until the worst happens. Now’s the time to consider your unique assets and risks – and how best to protect yourself and your family.

Do You Need Private Insurance?

If any of these apply to you, you may need private insurance:

  • The replacement cost of your home is greater than $1 million
  • You have collections of art, jewelry, wine, or more
  • You collect cars or luxury vehicles
  • You have boats, motorcycles, or snowmobiles
  • You volunteer on a not-for-profit board
  • You have a need for increased personal liability coverage
  • You employ a housekeeper, nanny, dog walker, or personal trainer
  • You own a cottage or other secondary residences
  • You own property outside of Canada
  • You are a global traveler

Protect Yourself from Liability

Even common scenarios can put you at risk. If you throw large parties or host friends at your vacation property or on your boat, you’re taking on the risk someone could get hurt. Private insurance helps ensure you have the right protection to match your wealth, assets, and unique exposures that come with your lifestyle.

Protect Your Collectibles

Most traditional policies include a limited amount of coverage for collectibles and special limitations for items like art, wine, and jewelry. Private insurance makes it possible to insure individual items for their unique worth and reimbursement options. You can even temporarily insure newly acquired jewelry and other items before you have their value assessed.

Protect Your Property

Luxury home additions, like smart-home and security systems or climate-controlled wine cellars, are not covered under typical home insurance policies. Private insurance solutions cover these. They also offer funds to upgrade damaged equipment (like a water heater, furnace, or AC system) to newer, more energy-efficient models, following a covered claim.

Protect Your Mental Health

In the unfortunate case of a break-in or theft, private insurance can cover counselling and related expenses. That means you can put the mental health of yourself and your family first.

Protect Your Reputation

Affluent families are more susceptible to lawsuits. Private insurance can help pay for independent legal advice and public image consultation to help protect your name and reputation.

Explore Your Private Insurance Options Today

The best insurance policies address your precise needs and provide the exceptional customer service you deserve.

Work with an RBC Private Insurance advisor for end-to-end white-glove service. The person who conducts your risk assessment will be the same one you’ll contact if you need to make a claim. They’ll get to know your unique situation and offer customized care you won’t find elsewhere.

Ready for enhanced protection? Please call our VIP service line at 1 800 769-2517 or request a private consultation here.

RBC Insurance

We make it easy to find expert advice, money-saving tips, and a range of insurance options for every moment of life.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Liability, home, auto, leisure and lifestyle insurance products (except for collector car insurance) are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. is registered as a damage insurance agency. As a result of government-run auto insurance plans, RBC Insurance does not offer auto insurance in Manitoba, Saskatchewan, and British Columbia. Actual coverage may vary by province. Certain conditions, limitations and exclusions may apply. For full terms and conditions, speak with your RBC Risk Assessment Insurance Specialist and refer to the insurance policy wording.

Collector vehicle insurance is available through Hagerty Canada, LLC and underwritten by Elite Insurance Company, a subsidiary of Aviva Canada Inc. Some coverages are not available in all provinces. Hagerty is a registered trademark of the Hagerty Group, LLC.

TM Trademark(s) of Royal Bank of Canada. Used under license.

Share This Article

Topics:

Managing Money Wealth Management

Read This Next

TORONTO, July 5, 2022 – In the midst of a tight labour market, Canadians are placing increasing importance on employer-provided benefits plans. According to a recent RBC Insurance survey, nearly three-quarters of young Canadians aged 18-34 (73 per cent) and 35-44 (69 per cent), are significantly more likely to leave their current employer for another that is offering what they would consider to be better benefits.

In determining what makes one benefits plan better than another, the top three desired features as reported by survey respondents were support for mental health (88 per cent), a health spending account (80 per cent) and options to add additional coverage (79 per cent) to better meet personal or financial objectives. These results are aligned with how workers are feeling, with 61 per cent reporting their overall well-being as good or excellent, down three points since 2021, and only 58 per cent reporting their mental health as good or excellent, down five points since 2021.

“Given our collective experience since March of 2020, it’s not surprising to see a range of worries and stressors reported by working Canadians” says Julie Gaudry, Head of Group Benefits, RBC Insurance. “The knock-on impacts of a tightening labour market have made flexible and tailored employer-provided benefits desired by many – and clearly a draw, particularly for younger generations.”

Market trends also signal the need for better employer benefits

Some other labour market trends are highlighting the need for competitive employer-provided benefits. According to RBC Economics, there are roughly 70 per cent more job postings and 6 per cent fewer available workers compared to pre-pandemic levels in Canada, creating a ‘buyer’s market’ for those seeking a job change. Further, The Bank of Canada’s Survey of Consumer Expectations revealed the likelihood of a worker voluntarily leaving a job is increasing, as younger Canadians reported lower levels of overall well-being, mental and physical health year-over-year since 2019.

“With heightened competition for talent, it’s critical that organizations develop or refine benefits plans as a key component of their offer,” says Gaudry. “We need to pay particular attention to this younger cohort, which already makes up a significant proportion of the workforce, and continues to grow. Employers must ensure the right support is available to this younger generation.”

Benefits plans make a difference

Canadians with employer-provided benefits are significantly more likely to rate their job satisfaction (64 per cent, six points higher), overall level of well-being (64 per cent, 10 points higher), physical health (62 per cent, eight points higher), mental health (60 per cent, seven points higher), and financial health (55 per cent, 17 points higher) higher than those without benefits.

Top three takeaways for employers

  1. Prioritize employee mental health and well-being. RBC Insurance Group Benefit Solutions offers a Workplace Wellness Toolkit which provides plan administrators with a framework for assessing the well-being needs of their employees and creating a wellness strategy that is tailored to the unique goals of their organization at no additional cost.
  2. Increase awareness of existing benefits plan features. Remind employees about the coverage they may already have available and how to access it. This is also a great opportunity to gather feedback about employee satisfaction of their benefits plan.
  3. Ensure your benefits plan meets the needs of your workforce. One way to do this is to offer flexible coverage and a health or wellness spending account which allows employees to customize their plans to meet their individual needs. This will help with retention and recruitment efforts; especially for younger Canadians.

About the RBC Insurance Study

These are some of the findings of an Ipsos poll conducted between April 22 and 25, 2022, on behalf of RBC Insurance. For this survey, a sample of 1,001 working Canadians was surveyed online. Weighting was employed to balance demographics to ensure that the composition of the sample reflects the population according to Census data and to provide results intended to approximate the sample universe. The results are considered accurate to within ±3.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian working adults been surveyed.

About RBC Insurance

RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth, annuities and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, Canada’s biggest bank and one of the largest in the world, based on market capitalization. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with approximately 2,600 employees who serve close to five million clients globally. For more information, please visit rbcinsurance.com.

Media contact

Cody Medwechuk, RBC Insurance Corporate Communications

Share This Article

TORONTO, May 10, 2022 – Changing external factors like the pandemic, economic uncertainty and inflation have prompted Canadians aged 55-75 to shift when they plan to retire. One-third (33 per cent) of recently retired Canadians say they retired sooner than planned, while three-in-ten (30 per cent) pre-retirees intend to change their retirement date because of the pandemic, according to a new survey from RBC Insurance.

Among Canadians who have already retired, more than a quarter (28 per cent) are spending more than anticipated, while four-in-ten (41 per cent) have experienced unexpected expenses, including major home repairs (16 per cent), healthcare or transportation costs (12 per cent) and helping family out financially (12 per cent), all of which are further exacerbated by rate hikes and inflation.

“The events of the last two years are clearly affecting Canadians – including those nearing retirement,” says Selene Soo, Director, Wealth Insurance, RBC Insurance. “And with the current high inflation rate added to the mix, many are feeling concerned about their purchasing power and increasing expenses. What people must remember is they can take control – good planning is critical in driving confidence around their future finances.”

As Canadians live longer, the impact of inflation on savings, expenses and purchasing power is the most pressing concern for three-quarters (78 per cent) of those surveyed, as well as a lack of guaranteed income (47 per cent) and outliving their savings (48 per cent). Additional concerns included outliving their spouse, feelings of loneliness and not having a financial legacy to leave behind. Yet Canadians are still largely relying on traditional savings tools such as TFSAs (54 per cent), RRSPs (53 per cent) and CPP/QPP/OAS (52 per cent) to ensure they have enough money to afford their lifestyle once they stop working. Fewer are taking advantage of annuities (7 per cent) or segregated funds (3 per cent) even though these tools can help address many of the retirement concerns expressed.

“It’s important to protect the money Canadians have worked so hard to save,” adds Soo. “But for many who may be in retirement longer than originally planned, the right tools can help ensure a guaranteed income or enough to leave behind a legacy – regardless of other external factors.”

In fact, a priority for the majority (58 per cent) of those aged 55-75 – whether retired or not – is evaluating will and estate planning. To help protect and grow your money for you or your loved ones, and to help preserve spending power in retirement, consider the following:

  • Consider investing in products such as Segregated Funds, including Guaranteed Investment Funds (GIFs) that can keep all, or a significant portion, of your original investment safe while it grows, and offer unique estate planning benefits.
  • Look at different investment options such as Annuities. These provide a guaranteed, predictable income stream for as long as you live that doesn’t fluctuate with the market or interest rates.
  • Speak to a financial planner or insurance advisor to discuss options and help ensure you’re on track to meet your long-term financial goals.
About the RBC Insurance Study

These are some of the findings of an Ipsos poll conducted between March 8th and 10th, 2022, on behalf of RBC Insurance. For this survey, a sample of 1,000 Canadians aged 55-75 was interviewed online. Quotas and weighting were employed to ensure that the sample’s composition reflects that of the Canadian population according to census parameters. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ± 3.5 percentage points, 19 times out of 20, had all Canadians aged 55-75 been polled. The credibility interval will be wider among subsets of the population.

About RBC Insurance

RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth, annuities and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, one of North America’s leading diversified financial services companies. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with approximately 2,800 employees who serve more than five million clients globally. For more information, please visit rbcinsurance.com. Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value (subject to death benefit and maturity guarantees).

Media contact

Kiara Famularo, RBC Corporate Communications, 647-272-4077

Share This Article

TORONTO, Feb 1, 2022 – As attitudes around health and wellness among employees and employers continue to shift, the number of working Canadians who view mental illnesses as a disability has hit a new high. According to a recent RBC Insurance survey, more Canadians now consider depression (54 per cent) and anxiety (44 per cent) to be disabilities, the highest figures respectively since 2019. At the same time, just over half (54 per cent) rate their mental health as excellent or good, which is a significant drop of 12 percentage points over that same period in 2019.

“Over the years, we have seen more and more Canadians recognizing that disabilities can be mental, and not just physical in nature,” says Maria Winslow, Senior Director, Life & Health, RBC Insurance. “This is an important shift, particularly as people continue to deal with the ongoing stresses of the pandemic and they continue to report a decline in their mental health.”

Significantly more respondents aged 18-34 logged mental health challenges (69% anxiety, 59% depression) compared to those 55 and older (42% and 29% respectively), which Winslow adds could highlight that pandemic-related stressors have had a particularly negative impact on younger people. These findings support actual claims trends among RBC Insurance clients; over one-third (35 per cent) of new individual long-term disability claims for younger clients (18-39) are related to mental health in 2021, which is trending upward since 2019.

Canadians with poor mental health more likely to take time off due to disability

The importance of mental health to overall wellbeing is further underscored by survey results that found Canadians reporting poor mental health (32 per cent) were more likely to take time off due to disability than those who report good mental health (12 per cent). Among working Canadians, feelings of burnout were the main source of stress (42 per cent), indicating the potential impacts of the pandemic such as fear, uncertainty, and instability around work and home life. Finances, and income protection if they get sick or have COVID-19 was the second highest stressor for nearly as many (39 per cent), followed by increased work hours/workload (33 per cent).

An infographic showing mental illness in Canada
RBC Insurance: More Canadians now consider depression and anxiety to be disabilities. (CNW Group/RBC Insurance)

However, feelings of stress or anxiety were significantly lower among those with support in place; Canadians who had a group benefits plan (60 per cent) and bought their own disability coverage (66 per cent) were more likely to rate their mental health as excellent or good. Still, those who rated their mental health as excellent or good in 2021 has dropped (-8 points) from the previous year. At the same time, fewer people report having disability coverage either through their workplace benefits (-6 points) or an individual disability plan (-9 points) – something which can help replace lost income should someone be unable to work for an extended period.

“The number of Canadians with disability coverage has declined from the peak of the pandemic to today,” adds Winslow. “But as mental health challenges continue to rise and the future remains uncertain, it’s more important than ever for all Canadians to consider their options for financial protection.”

Tips to manage stress and mental health

Canadians should consider these three tips to help manage stress and maintain good mental health:

  • Focus on healthy habits. Whether working at home, the office or a hybrid of both, it’s important to maintain healthy habits. Take frequent mini-breaks to exercise or meditate, and foster social connection with others. Establish clear boundaries between work and personal time. Along with a balanced diet and getting enough sleep, these are critical for supporting mental health and overall well-being.
  • Adjust your lifestyle and spending. With inflation on the rise, most people need to step up how much they save and prioritize what’s important to keep financial stress at bay. Cook at home to limit takeout meals, avoid impulse purchases, and look for areas where you can reduce or eliminate fees and services that you don’t absolutely need or use.
  • Ensure you’re covered before an injury or illness occurs. Being proactive and taking control helps to lower anxiety and provide a greater sense of safety. Disability insurance can not only ensure income protection should you become unable to work, but many plans can also help you return to work through benefits such as rehabilitation, job retraining and other services.

To learn more, visit www.rbcinsurance.com/disability.

About the RBC Insurance Survey

These are some of the findings of an Ipsos poll conducted between October 14 to 18, 2021. For this survey, a sample of 1,501 employed Canadians aged 18+ was interviewed. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±3.1 percentage points, 19 times out of 20. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

About RBC Insurance

RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, one of North America’s leading diversified financial services companies. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with approximately 2,500 employees who serve more than four million clients globally. For more information, please visit www.rbcinsurance.com.

Media contact

Kiara Famularo, RBC Corporate Communications, 647-272-4077

Share This Article

Socially Responsible Investing (SRI) has boomed in recent years as investors have discovered they can put their money behind investments that contribute to important social and environmental issues. According to SIMFUND Canada, Canadians invested more than $3.2 billion in Canadian-based environmental, social and governance (ESG) funds in 2020, while total net assets in these funds exceeded $22 billion – a 37% increase over the year before.

At the same time, studies have found that companies in SRI funds have better environmental, social and governance practices that may make them more sustainable long-term and therefore healthier and less volatile financially. A company’s ethical practices have also been shown to reduce exposure to scandals, disasters and lawsuits.

All of these factors can positively affect share prices and impact returns for investors.

Understanding SRI

When it comes to responsible investing, there are a number of terms and acronyms investors may come across – such as Impact Investing, ESG and SRI, which are sometimes used interchangeably. Understanding the difference between them can help new investors navigate this landscape.

For example, a company may be considered a responsible investment if it has a diverse board of directors – a company that manufactures weapons, on the other hand, would not be. ESG investing, meanwhile, considers how Environmental, Social and Governance factors affect the performance of a company, both positively and negatively (and therefore an investor’s returns).

Impact investing is a way to invest your money to create measurable positive outcomes. While SRI and impact investing both aim to bring about social change while delivering a financial return, impact investing requires that the change be more timely and impactful. Impact investing often involves private funds from institutional investors, while SRI investing involves investments available to all retail investors.

There’s more than one way to be a socially responsible investor

SRI investments aren’t simply selected by typical performance metrics such as earnings, growth and profit margins, but also by whether a company’s business practices align to the investor’s values – or not. To determine which companies to select for a fund, a fund manager has two methods to use: positive and negative screening.

Positive screening is a process that identifies companies making positive social or environmental contributions. Those with better ESG practices compared to their competitors are more likely to be included in the fund. While in many cases positive screening techniques highlight organizations that are actively furthering environmentally sustainable or positive social practices, positive screening is not limited to investing in companies within environmentally or socially focused industries. Companies with a stronger commitment to ESG practices in any industry may be considered as socially responsible investments.

Negative screening is one of the most basic methods of separating socially responsible investments from those that are likely to have a negative effect on society. It is one of the most widely used processes of weeding out companies that do not align with an investor’s values, such as those in industries like alcohol, tobacco or gambling, organizations associated with human rights violations or environmental damage or companies that do not meet diversity standards.

Both methods can lead to socially responsible investing. While negative screening prevents investors from supporting practices they find undesirable, positive screening purposefully supports those companies that are actively doing good and supporting investor values.

Investing in line with your values can pay off

For Canadians looking to invest in funds that can make a positive difference in the world, the future is bright. New funds continue to be introduced as interest grows in SRI investing. Companies with strong ethical and environmental practices may perform better in the long-term because they’re more sustainable. With a win-win situation like this, it’s no wonder Canadians are increasingly adopting socially responsible investment practices.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Share This Article

Topics:

Managing Money Wealth Management

Read This Next

Socially Responsible Investing (SRI) has boomed in recent years as investors have discovered they can put their money behind investments that contribute to important social and environmental issues. According to SIMFUND Canada, Canadians invested more than $3.2 billion in Canadian-based environmental, social and governance (ESG) funds in 2020, while total net assets in these funds exceeded $22 billion – a 37% increase over the year before.

At the same time, studies have found that companies in SRI funds have better environmental, social and governance practices that may make them more sustainable long-term and therefore healthier and less volatile financially. A company’s ethical practices have also been shown to reduce exposure to scandals, disasters and lawsuits.

All of these factors can positively affect share prices and impact returns for investors.

Understanding SRI

When it comes to responsible investing, there are a number of terms and acronyms investors may come across – such as Impact Investing, ESG and SRI, which are sometimes used interchangeably. Understanding the difference between them can help new investors navigate this landscape.

For example, a company may be considered a responsible investment if it has a diverse board of directors – a company that manufactures weapons, on the other hand, would not be. ESG investing, meanwhile, considers how Environmental, Social and Governance factors affect the performance of a company, both positively and negatively (and therefore an investor’s returns).

Impact investing is a way to invest your money to create measurable positive outcomes. While SRI and impact investing both aim to bring about social change while delivering a financial return, impact investing requires that the change be more timely and impactful. Impact investing often involves private funds from institutional investors, while SRI investing involves investments available to all retail investors.

There’s more than one way to be a socially responsible investor

SRI investments aren’t simply selected by typical performance metrics such as earnings, growth and profit margins, but also by whether a company’s business practices align to the investor’s values – or not. To determine which companies to select for a fund, a fund manager has two methods to use: positive and negative screening.

Positive screening is a process that identifies companies making positive social or environmental contributions. Those with better ESG practices compared to their competitors are more likely to be included in the fund. While in many cases positive screening techniques highlight organizations that are actively furthering environmentally sustainable or positive social practices, positive screening is not limited to investing in companies within environmentally or socially focused industries. Companies with a stronger commitment to ESG practices in any industry may be considered as socially responsible investments.

Negative screening is one of the most basic methods of separating socially responsible investments from those that are likely to have a negative effect on society. It is one of the most widely used processes of weeding out companies that do not align with an investor’s values, such as those in industries like alcohol, tobacco or gambling, organizations associated with human rights violations or environmental damage or companies that do not meet diversity standards.

Both methods can lead to socially responsible investing. While negative screening prevents investors from supporting practices they find undesirable, positive screening purposefully supports those companies that are actively doing good and supporting investor values.

Investing in line with your values can pay off

For Canadians looking to invest in funds that can make a positive difference in the world, the future is bright. New funds continue to be introduced as interest grows in SRI investing. Companies with strong ethical and environmental practices may perform better in the long-term because they’re more sustainable. With a win-win situation like this, it’s no wonder Canadians are increasingly adopting socially responsible investment practices.

Interested in investing in an SRI fund? Speak with your RBC Insurance Advisor and learn about the new funds we’re introducing to support your goals and values.

Call us at 1-888-512-3059.

 

RBC Insurance

We make it easy to find expert advice, money-saving tips, and a range of insurance options for every moment of life.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Share This Article

Topics:

Managing Money Wealth Management

Read This Next