Responsible investing (RI), also known as socially responsible investing, incorporates environmental, social and corporate governance criteria into the selection and management of investments.Getty Images/iStockphoto
My wife and I have been nomadic for about eight years: We’ve lived in a camper van exploring Mexico and Central America, backpacked and rented homes across Asia and cycled around Europe. We built an eclectic network of friends in our travels; everyone from bohemians raising their children in RVs, to C-suite executives and wealthy entrepreneurs.
One thing I’ve learned from meeting and talking to so many different people worldwide is that we humans have a lot in common, especially when it comes to what makes us genuinely happy. After our basic needs are met, our incomes have little impact on life satisfaction. Other factors are far more important such as doing right by others, our communities and the planet.
But don’t take my word for it. Researchers have also discovered that happiness and ecological well-being go hand-in-hand.
It’s something more investors have also realized in recent years, which has fueled the demand for socially responsible investing (SRI). Research from the Responsible Investment Association shows 78 per cent of respondents want a portion of their portfolio to be put into companies that are providing solutions to reduce carbon emissions, for instance.
I recently spoke with a handful of these SRI-minded investors, including Ann Lalancette and her partner François Desjardins, who invest their entire stock market proceeds in Horizon’s Global Sustainability Leaders Index ETF (ETHI-T). It includes stocks reported to have a low environmental impact: about 70 per cent U.S. stocks and 30 per cent international shares.
Owning an SRI ETF doesn’t directly help the environment any more than owning oil and gas ETFs destroy it. That’s because publicly traded companies don’t really use investors’ money to grow their enterprises (unless you buy their bonds). But Ms. Lalancette and Mr. Desjardins sleep better knowing they don’t profit from companies they don’t respect.
Skeptics of SRI funds say not every stock within them should be considered ‘green.’ They also question their performance. But numerous studies over the years have shown that SRI investments do pay off. While many SRI funds have lagged in recent months, amid the resurgence in energy prices, their performance has been on par or better than the broader market in recent years.
Consider some of the ETFs in the space, like the Jantzi Social Index ETF (XEN-T), the oldest on the market having launched in 2007. With a management expense ratio (MER) of 0.55 per cent, it charges higher fees than most ETFs. But that hasn’t hurt its performance.
According to Morningstar, it gained 28 per cent in 2021. Its annualized return was about 8 per cent over the past five years (data as of Jan. 27 close). That compares to the iShares Core S&P/TSX Capped Composite Index ETF (XIC-T), with an MER of 0.06 per cent. It gained 25 per cent in 2021 and has an annualized return of 9 per cent over the past five years.
In the future, SRI funds might compare even better. As people become more environmentally aware, many reduce what they spend on environmentally harmful goods and services while increasing what they spend on less harmful businesses. That could boost business profits for ‘greener’ companies, resulting in faster growing prices for such stocks.
I recommend several socially responsible all-in-one portfolio ETFs in my new book, Balance. Aggressive investors might like the iShares ESG Equity ETF Portfolio (GEQT-T). The ESG in the name stands for a focus on stocks with better environmental, social and governance practices. GEQT includes about 50 per cent exposure to U.S. stocks, 30 per cent Canadian stocks and 20 per cent developed international stocks.
The iShares ESG Growth ETF Portfolio (GGRO-T) is slightly less aggressive. It has a similar geographic breakdown of stocks. But it includes about an 18 per cent exposure to Canadian bonds.
More conservative investors might prefer the iShares ESG Balanced ETF Portfolio (GBAL-T). It includes 65 per cent stocks and 35 per cent bonds. More risk-averse investors might choose iShares ESG Conservative Balanced ETF (GCNS-T). It includes about 45 per cent stocks and 55 per cent Canadian bonds. Each of these ETFs have an MER of 0.24 per cent.
Not only could such funds help people feel better, iShares maintains a consistent allocation. That means, as with other all-in-one portfolio ETFs, investors don’t have to worry about rebalancing.
According to Morningstar, most investors in all-in-one funds perform better than those that buy individual ETFs. That’s because investors in all-in-one funds tend to speculate less. They don’t have to sweat over what fund to buy during any given month. Nor do they have to worry about when to rebalance. In other words, they don’t have to think much about their investments. And that adds another benefit.
In a 2015 issue of the Journal of Experimental Psychology, behavioural economist Kathleen Vohs referenced 165 research studies in 18 different countries, suggesting that when we focus less on money (which an all-in-one fund allows us to do) we tend to be more helpful and social. Harvard’s eight-decade-long Study of Adult Development says good relationships with others are the most fundamental key to a happy life.
That’s why all-in-one portfolios of socially responsible ETFs might boost your happiness, your wealth and your environmental consciousness. It’s just the sort of balance you might be looking for.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
