The rate of growth in socially responsible investments in Canada has slowed in recent years, but SRI assets continue to represent a substantial one-fifth of total invested assets under management across the country, the latest Socially Responsible Investment Review has found.

Released on Thursday, the report by the Social Investment Organization finds that assets invested according to socially responsible guidelines have increased to $609.23 billion from $503.61 billion in 2006, when the last review was conducted. This represents a growth rate of 21%, down from growth of more than 600% between 2004 and 2006.

“While the growth rate was lower than the growth rate experienced by SRI in the 2004 to 2006 period, this report shows that SRI is continuing to occupy a significant share of the financial services market in Canada,” the review says.

Specifically, the SRI assets represent 19.9% of an estimated $3 trillion in total investment industry assets under management in Canada, according to the review. This is up slightly from 19.5% in 2006.

However, the period of review ends in June 2008, and therefore the numbers do not account for the significant market deterioration that has occurred since that time.

“Obviously, we believe that the SRI assets would be somewhat lower,” said Eugene Ellmen, executive director of the Social Investment Organization. But he expects that the value of SRI assets have declined in correlation with the rest of the market, and so the assets are likely to maintain their proportionate representation coming out of the downturn, Ellmen said.

“The important thing to remember is that the relative position of SRI in the market didn’t change between 2006 and 2008,” he said. “Even with the lower numbers now, we expect that we would still be in the range of about 20%.”

In fact, the report states that SRI assets could be in a position to gain more momentum as the stock market recovers. “SRI is well-poised to survive the current economic turmoil and come out of it ready for strong growth,” the review says.

In the retail realm, SRI investment fund assets jumped 22% to $22.19 billion in June 2008, from $18.14 billion in June 2006. This included a hefty 40% boost in assets of renewable energy income trusts to $8.41 billion. The increase is largely a result of strong growth in the renewable energy sector – a sector that is set to continue booming, according to Ellmen.

“In Ontario, with the Green Energy Act coming in, we expect that that growth will continue even faster,” he said.

The growth in retail investments also included a 7.2% boost in assets of socially responsible retail venture funds to $8.24 billion; and a 25% increase in assets of socially responsible mutual funds, which now hold $5.54 billion.

Pension funds have also substantially boosted their socially responsible investments in the past two years, the report found.

“In Canada, and across the globe, there is a growing global movement by pensions and endowments to consider the integration of environmental, social and governance (ESG) factors into the selection and management of investments,” the review states.

Specifically, it found that Canadian pension and endowment assets invested under responsible investment policies increased by 26% to $544.13 billion in 2008.

One popular method of socially responsible investing is to screen out investments in companies that fail to adhere to pre-determined social criteria. This year, the top area of concern among socially responsible investors was military weapons, with 23 firms screening out investments in companies that generate revenue from this area.

Close behind on the screening list were environmental issues, tobacco, nuclear energy and employee relations.

IE