Socially Responsible Portfolio

This portfolio is very basic, and eliminates the 'sin sectors' like tobacco, military weapons, and companies with the lowest sustainability scores in their sector.  The total annual cost of this portfolio is 0.84%.

SRI_Portfolio.png

Canadian Equity   20%       iShares Jantzi Social Index (XEN)


US Equity             20%        iShares MSCI USA ESG Select Social Index (KLD)


International Equity        20%        Meritas International Equity Fund F-Class (SRI305)

Canadian Bonds    30%      PH&N Community Values Bond Fund

Microfinance         10%       Oikocredit Canada - Central Bond

Canadian Equity
The S&P/TSX 60 is mostly made up of Energy (25.1%), Mining (22.4%), and Banks who are the primary investors in energy & mining (31.4%).  That makes it tough ground to tread for sustainable investors.  The iShares Jantzi Social Index (XEN) is currently the only socially responsible ETF that tracks the TSX 60.  It is overweight banks (41.7%) and underweight Energy (18.6%) and Mining (13.9%).  Basically, they’ve removed the worst of the worst companies.  It doesn’t include companies like Barrick Gold, Enbridge, TransCanada, Canadian Natural Resources, and Goldcorp.  Sadly, this ETF does not participate in shareholder engagement.  The MER for this fund is 0.55%.


US Equity
The iShares MSCI USA ESG Select Social Index (KLD) tracks the MSCI USA ESG Select Index, and includes about 250 companies from the MSCI USA index that have been screened for positive environmental, social, and governance (ESG) characteristics.  Companies that have a higher ESG score have a higher weighting in the ESG index.  It still includes companies in sectors like energy and mining that are inherently unsustainable, but iShares has created a special set of proxy voting guidelines for this fund.  This policy states that it will “support social, workforce and environmental proposals that promote ‘good corporate citizenship’ while enhancing long term shareholder and stakeholder value and proposals that call for more detailed and comparable reporting of a company’s social, workforce and environmental performance”.  The MER for this fund is 0.50%.


International Equity
Sadly, there isn't a socially responsible international equity ETF on the market. To fill this gap, we must resort to mutual funds. I've chosen the Meritas International Equity Fund. It outsources its work to great organizations, like Sustainalytics (for ESG analysis), SHARE (for shareholder engagement), and it even invests a small portion of its portfolio in microfinance through  MicroVest. Unfortunately, the downside is that it has an exorbitant MER of 1.96%. The fee would be even higher (2.96%) if you bought the A-Series, but most online brokerages will let you purchase the F-Series version that omits the 1% trailer normally paid to the mutual fund salesperson.


Canadian Bonds
Although there is no socially responsible bond ETF on the market, Phillips, Hager & North is a well-regarded bond management firms that offers an accessible (minimum $1,000) socially responsible bond fund.  It includes both government and corporate bonds, but uses the same approach as the funds above in excluding the so-called 'sin sectors' and dropping companies with the lowest ESG score in their sector.  The MER of this fund is 0.61%.


Microfinance

Investors that want to boost the positive social impact of their portfolio can include Oikocredit Canada Central Bonds. This investment provides loans to entrepreneurs in emerging countries at a reasonable interest rate.  I refer to it as 'recyclable philanthropy' because instead of donating money to a charity (where they'll spend it and come asking for more next year, this same money is loaned to business owners who pay it back, so it can be loaned out again and again and again.  This bond fund pays a paltry 1.75% annual return, so it is geared towards investors who are more concerned with maximizing social impact.  Additionally, investors are locked-in for a 5-year term so there is not very much liquidity.  That said, it is extremely accessible (minimum $250) and leverages the relative strength of the Canadian dollar to create employment and wealth around the world.  There is no MER for this fund.

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commented 2016-12-26 11:07:50 -0500
iShares opened ESG-focused Index ETFs for International Developed and International Emerging equity markets in June 2016.

ESGD: https://www.ishares.com/us/products/283778/ (MER 0.40%)
ESGE: https://www.ishares.com/us/products/283777/ (MER 0.45%)

Each of these ETFs has the same proxy voting policy as the iShares US Equity ETFs (KLD and DSI).

https://www.ishares.com/us/literature/shareholder-letters/proxy-voting-policy-social-index-funds.pdf
(Additional link in case one above stops working: https://www.ishares.com/us/library?keyword=proxy+voting+policy)
commented 2015-06-03 00:53:05 -0400
A quick tip for anyone looking to buy the Meritas International Equity Fund (or any other Meritas mutual fund) online through Qtrade Investor: the F-Series funds don’t appear when using the Symbol Lookup tool when you go to purchase a fund. However, you can still purchase the F-series if you manually type in the F-Series Fund Codes:

SRI302 (MERITAS CDN BD FD CL F -NA)
SRI303 (MERITAS JANTZI SOC IDX CL F-NA)
SRI304 (MERITAS US EQTY FD CL F -NA)
SRI305 (MERITAS INTL EQTY FD CL F-NA)
commented 2013-12-27 14:33:50 -0500
Thank you
Don't let your money do things you wouldn't