Many greying Canadians are adding a green hue to their investment portfolios to make money, manage risk and leave a better world for their children and grandchildren.

Responsible investing – which considers both financial returns and social/environmental good – has long been on the radar of baby boomers and Gen Xers, with ethical mutual funds being widely available since the 1990s. Still, it was often seen as a niche strategy that potentially added risk to an investment portfolio.

Consequently, considering only companies with strong environmental, social and governance (ESG) track records may seem ill-fitted for today’s retirees who seek steady, low-risk investment returns.

But responsible investing has moved mainstream in recent years. ESG performance has become a critical metric used by large money managers such as BlackRock Inc. and institutional investment managers like the Canada Pension Plan Investment Board (CPPIB).

“Many mainstream institutional investment managers began to integrate ESG metrics and research into their investment processes in the 2000s,” says Simon MacMahon, head of ESG research at Sustainalytics in Toronto.

The CPPIB was among the first signatories to the Principles for Responsible Investment, a United Nations-supported network of investors agreeing to use ESG criteria in investment decisions. About 3,800 pension and other large-scale investment funds, representing more than $121-trillion assets under management, are signatories, Mr. MacMahon adds.

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