Welcome to CB’s personal-finance advice column, Make It Make Sense, where each month experts answer reader questions on complex investment and personal-finance topics and break them down in terms we can all understand. This month, Damir Alnsour, a lead advisor and portfolio manager at money-management platform Wealthsimple, tackles eco-friendly investments. Have a question about your finances? Send it to [email protected].

Q: It’s Earth Month! And… there’s a climate crisis. How can I invest in companies and portfolios funding causes I believe in?

Earth Day may have been introduced in 1970, but today it’s more relevant than ever: In a 2023 survey, 72 per cent of Canadians said they were worried about climate change. Along with carpooling, ditching single-use plastics and composting, you can celebrate Earth Month this year by greening your investment portfolio.

Green investing, or buying shares in projects, companies, or funds that are committed to environmental sustainability, is an excellent way to support projects and businesses that reflect your passions and lifestyle choices. It’s growing in favour among Canadian investors, but there are some considerations investors should be mindful of. Let’s review some green investing options and what to look out for.

Green Bonds

Green bonds are a fixed-income instrument where the proceeds are put toward climate-related purposes. In 2022, the Canadian government launched its first Green Bond Framework, which saw strong demand from domestic and global investors. This resulted in a record $11 billion green bonds being sold. One warning: Because it’s a smaller market, green bonds tend to be less liquid than many other investments.

It’s also important to note that a “green” designation can mean a lot of different things. And they’re not always all that environmentally-guided. Some companies use broad, vague terms to explain how the funds will be used, and they end up using the money they raised with the bond sale to pay for other corporate needs that aren’t necessarily eco-friendly. There’s also the practice of “greenwashing,” labelling investments as “green” for marketing campaigns without actually doing the hard work required to improve their environmental footprint.

To make things more challenging, funds and asset managers themselves can partake in greenwashing. Many funds that purport to be socially responsible still hold oil and gas stocks, just fewer of them than other funds. Or they own shares of the “least problematic” of the oil and gas companies, thereby touting emission reductions without clearly disclosing the extent of those improvements. As with any type of investing, it’s important to do your research and understand exactly what you’re investing in.

Socially Responsible Investing (SRI) and Impact Investing

SRI and impact investing portfolios hold a mix of stocks and bonds that are intended to put your money towards projects and companies that work to advance progressive social outcomes or address a social issue—i.e., investing in companies that don’t wreak havoc on society. They can include companies promoting sustainable growth, diverse workforces and equitable hiring practices.

The main difference between the two approaches is that SRI uses a measurable criteria to qualify or disqualify companies as socially responsible, while impact investing typically aims to help an enterprise produce some social or environmental benefit.

Related: Climate Change Is Influencing How Young People Invest Their Money

Some financial institutions use the two approaches to build well-diversified, low-cost, socially responsible portfolios that align with most clients’ environmental and societal preferences. That said, not all portfolios are constructed with the same care. As with evaluating green bonds, it’s important to remember that a company or fund having an SRI designation or saying it partakes in impact investing is subjective. There’s always a risk of not knowing exactly where and with whom the money is being invested.

All three of these options are good reminders that, even though you may feel helpless to enact environmental or social change in the face of larger systemic issues, your choices can still support the well-being of society and the planet. So, if you have extra funds this April (maybe from your tax return?), green or social investing are solid options. As long as you do thorough research and understand some of the limitations, you’re sure to find investments that are both good for the world and your finances.

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KUALA LUMPUR: A meeting with 70 financial fund investors and corporate members at the recently concluded Joint Investors Meeting in London has touched on the MADANI government’s immediate action to stimulate strategic investment in important technologies, according to the Ministry of Finance (MoF).

In a statement today, it said that the government is serious about making investments a national agenda through the establishment of a high-level investment facilitation platform to ensure the implementation of potential and approved strategic investments through a “Whole of Government” approach.

Minister of Finance II Datuk Seri Amir Hamzah Azizan (pix), who led the Malaysian delegation to the Joint Investors Meeting from April 20 to 22, said that the National Investment Council (MPN) chaired by the Prime Minister is an integrated action that reflects how serious the government is in making Malaysia an investment hub in the region.

Among the immediate actions taken by the government is establishing the National Semiconductor Strategic Committee (NSSTF) to facilitate cooperation between the government, industry players, universities, and relevant stakeholders to place the Malaysian semiconductor industry at the forefront and ensure the continued growth of the electronics & electrical industry, especially the semiconductor sector, as a major contributor to the Malaysian economy.

The government also aims to empower Malaysia as a preferred green investment destination as well as remove barriers and bureaucracy in the provision and accessibility to renewable energy, especially for the new technology industry, including data centres, said Amir Hamzah.

He also said that the country’s investment prospects have reached an extraordinary level, with approved investments surging to RM329.5 billion in 2023 from RM268 billion in 2022.

He said about 74 per cent of manufacturing projects approved between 2021 and 2023 have been completed or are in process.

In addition, Amir Hamzah said the greater initial stage construction work completed in 2023 (RM31.5 billion) and 2022 (RM26.3 billion) shows a positive trend for future investment opportunities.

“From a total of 5,101 investment projects approved in 2023, as many as 81.2 per cent or 4,143 projects are in the services sector, 883 projects in the manufacturing sector, and 75 projects in other related sectors,” he said.

Before this, Amir Hamzah met with international investors in New York and Washington to clarify the direction of the implementation of the MADANI Economic framework to improve investors’ confidence in Malaysia’s economic level and strengthen the perception and investment sentiment of foreign investors towards the country.

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Compound interest is a thing of magic. It’s also one of your best bets if you’re looking to retire rich.

It might take time and patience but there’s not a whole lot of heavy lifting when it comes to a buy-and-hold investment strategy. What matters most is having decades of time in front of you, which will allow you to maximize the benefits of compounded returns. And, of course, choosing the right investments is equally important.

The magic of compound interest

With a decent return, building a million-dollar portfolio might not be as hard as you think. An initial investment of $15,000, returning 15% annually, would be worth just shy of $1 million in 30 years.

First off, 30 years is a long time, which means you’ll need to be planning your retirement far in advance. However, all it takes is one initial investment of $15,000 and the right stocks to build a $1 million portfolio.

Additionally, it’s important to remain realistic and acknowledge that a stock returning 15% annually is not exactly common. That being said, the TSX certainly has its share of dependable companies with track records of returning far more than just 15% per year.

I’ve put together a list of three Canadian stocks that are perfect for hands-off investors who are looking to retire rich.

Constellation Software

It will require a steep initial investment, but Constellation Software (TSX:CSU) is well worth its nearly $4,000-a-share price tag. When it comes to market-crushing returns, the tech stock has been in a league of its own over the past two decades.

Even as the company is now valued at a massive market cap of close to $80 billion, the impressive returns have continued. Shares are up more than 200% over the past five years. That’s good enough for a compound annual growth rate (CAGR) of 25%.

At a 25% annual return, a $15,000 investment would be worth a whopping $12 million in 30 years.

Descartes Systems

Descartes Systems (TSX:DSG) is another tech stock that’s no stranger to delivering market-beating returns. The company is also only valued at a market cap of $10 billion, leaving plenty of room for growth in the coming decades.

There’s a reason why Descartes Systems is one of the few tech stocks trading near all-time highs today. This stock is a proven winner, with lots of growth left in the tank.

Over the past five years, the stock has had a CAGR just shy of 20%.

goeasy

The last pick on my list is a beaten-down growth stock that’s trading at a serious discount.

The consumer-facing financial services provider has been hit by short-term headwinds from sky-high interest rates. With potential rate cuts around the corner though, now could be an excellent time to be loading up on goeasy (TSX:GSY).

Even with shares down 25% from all-time highs, the stock is still nearing a return of 300% over the past five years.

goeasy was crushing the market’s returns before the recent spike in interest rates, and there’s no reason to believe why the company won’t continue to do so for years to come.

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