Easy as Pie Portfolio

Divesting from fossil fuels just got a lot easier. A prominent Canadian mutual fund company - IA Clarington - recently announced that their Enhance Global Equity Fund (subadvised by Vancity credit union) has removed all exposure to fossil fuel companies.

This portfolio is the absolute simplest I could make it. It is 100% RRSP and TFSA eligible, and the annual management fee is 0.95%.

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Global Equity 60% IA Clarington Inhance Global Equity SRI Class F-Series (CCM5013)

Government Bonds 30% iShares 1-10 Year Laddered Government Bond Index ETF (CLG)

Impact Bonds 10% Oikocredit Global Impact GIC

Global Equity

I hate buying mutual funds, the fees are just so darn high! But for those more concerned with keeping things simple, the Inhance Global Equity SRI Class F-Series (CCM5013) is awesome. They’ve got a strong perspective on sustainability, and are definitely asking the right questions of companies before they invest. It is well-diversified both geographically and by sector, and works well as the core equity part of a portfolio. I commend their leadership as the first socially responsible mutual fund to recognize the severity of climate risk and completely divest from fossil fuels.

The management expense ratio (MER) - aka the annual management fee you’re paying - on this mutual fund is 1.47%. Although this is a much higher fee than we’d pay with ETFs, it is well below the average mutual fund fee (about 2.35%). Make sure you buy the F-Series of this fund, because the default A-Series has a way higher MER of 2.65%. Check with your online broker to make sure they offer the F-Series, and you should always purchase the fund yourself.

Government Bonds

Since every Canadian corporate bond index includes fossil fuels, we are left with government bonds. Lots of my clients have been flocking towards the iShares 1-10 Year Laddered Government Bond Index ETF (CLG). It’s a solid government bond portfolio, and the ladder will capture the higher rates more quickly be nice if interest rates start to rise. I like it because of the low MER of 0.15%.

Impact Bonds

Instead of just ‘doing less bad’, as sustainable investors I think it’s important that we also do more good. To that end, I’m allocating 10% of this portfolio to the Oikocredit Global Impact GIC. Oikocredit is a global microfinance organization that was established in 1975. It’s a co-op that finances and invests in fair trade organisations, other co-ops, microfinance institutions, and small businesses in 63 developing countries. I know some people are sceptical about microfinance, but this organization is amazing. I strongly suggest checking out their annual report. Microfinance is a great way for Canadian investors to maximize their impact, since our currency is so strong relative to other countries. $1,000 CAD loaned to social enterprises in Ghana, Chile, or Mongolia will have a much bigger impact than that same $1,000 CAD loaned to Canadian organizations.

Earlier this year, the Mennonite Savings & Credit Union teamed up to create a new product for Ontario investors. The Oikocredit Global Impact GIC is the lowest-risk investment impact investment in Canada. It’s quite genius, because you’re buying a Guaranteed Investment Certificate (GIC) from the credit union, who then matches your investment in buying shares in Oikocredit. This reduces your exposure to risk, while making your investment both RRSP and TFSA eligible. GICs are the only type of investment with a ‘guaranteed’ return. However, with low risk comes a low return. The GIC pays just 1.3% annually with no MER. 

Conclusion

This portfolio is by far the easiest way for Canadian investors to divest from fossil fuels. Although the management fees are a little higher, the simplicity reduces trading fees. As such, this portfolio is suitable for investors with smaller portfolios, and those looking for an easy way to divest. As always, it is fully customizable so investors can choose a different impact fund or add green sector ETFs. 

If you like this portfolio or have any questions, please leave a comment below!

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commented 2015-08-27 13:20:29 -0400
Interesting portfolio approach. So here’s my question: which online brokers actually offer F-series funds? I tried to purchase an Inhance fund through my existing TD Waterhouse account and was told I wasn’t permitted to purchase that fund class unless I worked with one of their (presumably fee-based) advisors. I then contacted Credential Director, an outgrowth of the credit union movement, and they also told me F-series funds were verboten.
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