The government-appointed Sustainable Finance Action Council submitted to Finance Canada this past fall a proposal for a green taxonomy – a framework for defining what is a sustainable investment in Canada. It has yet to be publicly released by Ottawa, but investors are likely wondering which companies stand to benefit. “Greener” companies, as defined by the taxonomy, should attract capital from institutional investors that have made net-zero and other sustainability-related commitments. The European Union has already released its taxonomy. Canada, as a resource-rich economy, will almost certainly have a taxonomy that is at least slightly different from Europe’s, but we can use Europe’s framework as a proxy to identify Canadian companies whose revenues could be classified as especially green in Canada. If these revenues are attractively valued today, this could represent an enticing entry point for investors.
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The Screen
We look for Canadian companies that have at least two-thirds of their revenue estimated to be aligned to the EU taxonomy. This means that the revenue comes from an activity that is classified as green by the FTSE Russell Green Revenues Classification System, and also pass further criteria like “do no significant harm” to other sustainability goals. For example, certain minerals – nickel, lithium and cobalt, to name a few – are critical to the energy transition, and mining them can be considered a green activity, but if this is done in a way that destroys ecosystems or harms local Indigenous communities, this would not be EU taxonomy-aligned.
We will then look at the enterprise value (EV) to revenue ratio to see which of these companies’ green credentials are not yet priced in by the market, and thus could be attractive investments today.
What we found
Attractively priced stocks aligned to EU taxonomy on green investing
Company
Ticker
EU Tax. Aligned Rev. (%)
EV/Rev (NTM)
1 Yr Total Return (%)
Div Yield, NTM (%)
Mkt Cap ($, millions)
Mon Close ($)
Boralex Inc
BLX.TO
100.0
8.7
33.2
1.6
4,196
41.00
Innergex Renewable Energy Inc
INE.TO
100.0
8.6
-1.4
4.4
3,332
16.39
Brookfield Renewable Partners LP
BEP_u.TO
99.6
8.8
-12.3
5.0
9,958
36.32
West Fraser Timber Co Ltd
WFG.TO
96.2
0.7
-13.4
1.2
8,115
99.76
Canadian National Railway Co
CNR.TO
91.8
7.1
8.1
1.9
110,738
164.81
Canadian Pacific Railway Ltd
CP.TO
89.9
9.3
9.1
0.7
96,365
104.03
Canfor Corp
CFP.TO
85.1
0.2
-28.6
0.0
2,637
21.85
NFI Group Inc
NFI.TO
79.8
0.7
-37.8
1.0
892
11.61
Stantec Inc
STN.TO
68.6
1.8
-0.9
1.1
7,297
66.15
Northland Power Inc
NPI.TO
67.2
6.3
9.2
3.2
9,270
37.79
Waste Connections Inc
WCN.TO
66.7
5.0
10.1
0.8
45,381
177.16
Source: London Stock Exchange Group | Data as of January 10, 2023
The screen yields 13 companies, with two from the forestry industry looking particularly attractively valued. West Fraser Timber Co. Ltd. and Canfor Corp. make all of their green revenue from the sustainable forestry microsector. They are also both attractively valued, with an enterprise value of only 0.7 times and 0.2 times forecast revenue for the next 12 months (NTM), respectively. Contrarian, opportunistic investors might also like the fact that Canfor shares are down 28.6 per cent over the past year, on a total return basis.
The only company whose shares are down more than Canfor’s is NFI Group Inc. – a Winnipeg-based company that produces mass-transportation vehicles. It is also attractively valued at 0.7 times NTM revenue. The company just won a contract on Tuesday to provide the city of Madison, Wis., with 46 zero-emission, high-capacity buses.
Investors are advised to do their own research before trading in any of the securities shown.
Hugh Smith, CFA, MBA, is director of sustainable finance and investing at London Stock Exchange Group.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
