Your guide to socially responsible investing in Canada

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Socially responsible investing (SRI) continues to gain traction in Canada.

According to the Responsible Investment Association's 2023 Canadian Responsible Investment Trends Report, responsible investment assets now represent 49% of Canada's investment industry, and 65% of Canadian investors are interested in the category,1 reflecting a growing commitment to integrating environmental, social, and governance (ESG) factors into investment decisions

What does it mean when more people are pouring money into socially responsible investments? The stocks will go up. 📈 Are you ready to jump into the pool? 

Build an SRI portfolio automatically with Wealthsimple

SRIs are investments deemed to meet a certain threshold of social responsibility.

❌ They exclude investments in industries considered “bad” for society such as fossil fuels, tobacco or firearms. 

✅ They include sectors that have a social benefit such as innovative healthcare, human rights or renewable energy.

SRIs also encompass investments in companies (outside of the forbidden sectors) that have a good record on environmental, social, and governance issues, known as ESG investing.

Companies are assessed by an independent third party, such as Morgan Stanley Capital International (MCSI), and receive a score indicating how well they comply with the ESG criteria. The higher the score, the better they are—at least as compared to their competitors—in regard to factors such as pollution, carbon emissions, human rights, health and safety, labour practices, diversity, corruption, transparency, and disclosure.

Of course, responsible investing isn’t just about supporting companies that respect the environment. There’s a whole slew of values — such as human rights, labour practices, health, and corporate governance — that firms can address while still earning profits and increasing value for investors.

What are socially responsible investments?

Ethical investing is an offshoot of SRI, but with a more personal view of what industries are considered “bad” for society. A Halal portfolio, for example, will exclude interest-bearing investments as well as holdings in the alcohol, gambling, and pork industries so as to comply with Islamic law. Most socially responsible investors, on the other hand, would simply screen out the worst offenders among those asset classes.

Ethical investing does not necessarily have to be linked to religious practice. It can align with whatever values are important to you—be it veganism, pacifism, climate change, or anything else.

Examples of an ethical investments

  • Faith-based funds: A Halal investment fund complies with Islamic law by excluding companies involved in alcohol, gambling, pork products, and interest-bearing financial services.
  • Lifestyle-aligned portfolios: A vegan investment fund that avoids companies involved in animal testing, factory farming, or the production of animal products.

Impact investing seeks to create positive, measurable change in society, and is therefore considered part of socially responsible investing. With impact investing, you put your money into companies, non-profits, or other organizations that are actively doing good, such as providing progressive products or solutions in areas including clean energy, sustainable development or agriculture, housing, education, and healthcare.

As with all SRIs, impact investments can be assets of any kind — including stocks, bonds, or funds. The main difference is that impact investments don’t simply ensure that your financial earnings don’t come from unsavoury industries, they also lead to a constructive impact while boosting your wealth.

Examples of impact investments

  • Renewable energy projects: Green bonds issued to finance wind farms, solar panels, or hydroelectric projects that reduce carbon emissions.
  • Social impact funds: A fund that invests in affordable housing projects or microfinance institutions providing loans to small businesses in developing countries.

ESG investing evaluates companies based on their environmental, social, and governance practices. These factors help assess risks and opportunities related to sustainability, diversity, or corporate ethics. ESG criteria are often used within SRI to select or exclude investments.

Examples of ESG investments

  • ESG-focused ETFs and mutual funds: Vanguard ESG U.S. Stock ETF (ESGV): Excludes companies involved in fossil fuels, tobacco, and weapons or the iShares MSCI KLD 400 Social ETF (DSI): Includes U.S. companies with high ESG ratings.
  • High ESG-rated companies: Investing in a company like Unilever (NYSE:UL), recognized for its sustainable sourcing and commitment to reducing environmental impact.

How to invest in socially responsible companies

There are two ways to invest in socially responsible companies. You can buy stocks, ETFs and mutual funds with one of the best trading platforms in Canada. Alternatively, you can open an online investment account with any one of the best robo advisors in Canada, many of which have socially responsible investment portfolio options.

Tip: If you want to shelter your investment earnings from tax and have sufficient contribution room, go with a registered account, such as an RRSP or TFSA.)

1. Open a robo advisor and let a robot do the work while you bask in the glory

Wealthsimple managed investing Questwealth (a division of Questrade) JustWealth
Wealthsimple logo Questrade logo JustWealth logo
Low fees: 0.5% for most accounts; no minimum
Ease of use: Intuitive platform with automated rebalancing
SRI focus: Exclusive SRI portfolios, including Halal, screening out harmful industries
Average MER for SRI portfolio: 0.23%
Low fees: Starting at 0.25%; actively managed, $1,000 minimum
Custom risk profiles: Portfolios tailored to individual comfort levels
SRI options: Actively managed ESG portfolios for responsible investing
Average MER for SRI portfolio: 0.24%, depending on risk level
Specialized portfolios: Over 70 portfolio options, $5,000 minimum
Personalized advice: Dedicated portfolio manager for every account
SRI focus: Offers socially responsible ETF portfolios
Average MER for ESG portfolio: 0.23%, depending on specific portfolio
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With robo advisors, after you enter a few details online including your age, comfort with risk, and investment goals (including a preference for ethical investments), it will recommend a diversified mix of low-fee socially responsible exchange-traded funds (ETFs) that match your risk tolerance.

So, for example, a more conservative investor will have a portfolio with a higher proportion of safer fixed-income investments, while a more aggressive investor will get a portfolio that skews towards riskier but potentially better-paying, equity investments.

Below, we break down each of our top robo advisors with socially responsible investment portfolios and the ETFs within them. 

One of the best ways to DIY invest is to look at the underlying holdings of robo advisor portfolios. If you want to avoid the fees, search the ticker symbol with your investment brokerage of choice (more in the section below).

Wealthsimple charges the same robo advisor fees (0.4% to 0.5% depending on your account balance) for SRI portfolios that it does for non-SRI portfolios. However, like any robo advisor, the fees charged by the firms that manage the ETFs are slightly higher than 'regular' ETFs at about 0.22%. 

Wealthsimple recently overhauled its SRI portfolios, which it began offering in 2016. Whereas the equity portion used to be comprised of ETFs from third-party providers such as iShares and Invesco—which may have included oil and gas companies with high ESG scores—those have now been replaced with Wealthsimple’s own SRI ETFs.

These funds completely screen out problematic industries, such as oil and firearms, while providing better diversification and lower fees.

Wealthsimple also has a Halal Investing portfolio, an ethical investment fund of 50 stocks for clients looking for an option that’s compliant with Islamic law.

Which ETFs are in Wealthsimple's SRI portfolios?

Here's how Wealthsimple is doing their socially responsible investing. 

Name (ticker) Description
Wealthsimple North America Socially Responsible Index ETF (WSRI) This ETF focuses on Canadian and U.S. companies that meet stringent ESG standards, excluding industries such as oil and gas, weapons manufacturing, and those lacking gender diversity on their boards.
Wealthsimple Developed Markets ex North America Socially Responsible Index ETF (WSRD) Targeting developed markets outside North America, WSRD invests in companies that adhere to high ESG criteria, avoiding sectors like fossil fuels and emphasizing firms with diverse leadership.
Wealthsimple North America Green Bond ETF (WSGB) This ETF comprises green and social bonds that provide fixed-income exposure while directly funding projects linked to environmental and social causes.
BMO Long Federal Bond Index ETF (ZFL) Included to provide stability through long-term debt securities issued or guaranteed by the Government of Canada.
SPDR Gold MiniShares Trust ETF (GLDM) Offers exposure to physical gold, serving as a hedge against market volatility.

Questwealth Portfolios is the most recent Canadian robo-advisor to offer SRIs, but it's been around since 2018 after a rebrand at the time. 

The SRI portfolios have the same diverse set of risk profiles as the five regular Questwealth Portfolios: conservative, income, balanced, growth, and aggressive. All of the portfolios are actively managed to monitor and respond to significant changes in market conditions.

Which ETFs are in Questwealth's SRI portfolios?

Questwealth's Socially Responsible Investing (SRI) portfolios are constructed using a selection of Exchange-Traded Funds (ETFs) that focus on companies meeting specific environmental, social, and governance (ESG) criteria. While the exact ETFs may vary based on the chosen risk profile (e.g., Aggressive, Growth, Balanced, Income, Conservative), commonly included ETFs in these portfolios are:

Name (ticker) Description
iShares Jantzi Social Index ETF (XEN) Focuses on Canadian companies with high ESG ratings
iShares MSCI KLD 400 Social ETF (DSI) Targets U.S. companies with strong ESG performance
iShares MSCI EAFE ESG Optimized ETF (ESGD) Invests in developed international markets, emphasizing ESG criteria
iShares ESG MSCI EM ETF (ESGE) Concentrates on emerging market companies with favourable ESG characteristics
SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) Excludes companies owning fossil fuel reserves, focusing on environmentally conscious investments
iShares ESG Canadian Aggregate Bond Index ETF (XSAB) Provides exposure to Canadian bonds meeting ESG standards
iShares ESG Canadian Short Term Bond Index ETF (XSTB) Offers access to short-term Canadian bonds with strong ESG ratings

Justwealth typically constructs its portfolios using a variety of ETFs screened for environmental, social, and governance (ESG) criteria.

They offer 6 ESG portfolios with a range of returns from a Conservative Growth Portfolio of 0.96% and a Maximum Growth Portfolio of 11.80%.2

Here's the top 3 holdings of JustWealth's ESG Maximum Growth Portfolio, accounting for 85% of the it. 

Name (ticker) Description
iShares ESG Advanced MSCI Canada ETF (XCSR) Focuses on Canadian companies with superior ESG ratings, excluding controversial sectors like fossil fuels, tobacco, and weapons for sustainable investing
iShares ESG Advanced MSCI USA ETF (USXF) Targets U.S. companies with top-tier ESG performance, excluding industries like fossil fuels, tobacco, and weapons, ensuring sustainable investment choices
iShares ESG Advanced MSCI EAFE ETF (XSEA) Invests in developed markets outside North America, prioritizing companies with high ESG scores while excluding controversial industries like fossil fuels and weapons

And, for good measure, here are the top 3 holdings in JustWealth's ESG Conservative Growth Portfolio that make up 84% of it. 

Name (ticker) Description
Horizons S&P Green Bond Index ETF (HGGB) Invests in global green bonds, funding environmentally sustainable projects like renewable energy, clean transportation, and climate change mitigation initiatives
BMO Government Bond ETF (ZGB) Provides exposure to high-quality, low-risk Canadian government bonds, offering stable returns and diversification for conservative fixed-income investors
iShares ESG Advanced MSCI USA ETF (USXF) Invests in U.S. companies with leading ESG practices, excluding controversial industries like fossil fuels, tobacco, and weapons

2. Open a brokerage account to buy stocks, ETFs and mutual funds

Wealthsimple self-directed Questrade TD Direct Investing
Wealthsimple logo Questrade logo TD DIrect Investing
Low fees: $0 commissions for stock and ETF trades.
Ease of use: Simple app designed for beginner investors.
SRI focus: Offers SRI ETFs and Halal portfolios.
Low fees: Free ETF purchases, low selling commissions.
Educational tools: Robust resources for DIY investors.
SRI options: Access to a wide range of ESG and impact ETFs.
Customer support: Strong in-person, phone, and online help.
Advanced tools: Comprehensive research for experienced investors.
SRI access: Offers ESG funds and screening tools.
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Socially (and fiscally) responsible investing: SRI, Impact and ESG ETF Funds

If you are comfortable choosing and buying SRI funds on your own, you can do away with those robo-advisor management fees entirely. 

That’s as low a fee as you can get. Say, for example, you have $100,000 in SRI ETFs in your online brokerage account, with an average MER of 0.25%. That’s $250 for the year, as compared with $400 to $870 annually for the above robo-advisor portfolios, or up to $2,500 for an actively managed mutual fund account. That’s a savings of up to 90%

Below is a chart of many of the SRI ETFs, ESG ETFs, and Impact ETFs contained within those robo advisor portfolios. To help you choose a “set it and forget it” portfolio that aligns with your values, we’ve outlined the SRI offerings provided by Canada’s top robo advisors.

SRI ETFs are investments that track an entire market — such as U.S. large-cap stocks, or Canadian government bonds — but exclude certain “unethical” industries, such as oil and gas, weapons, and tobacco, and limit holdings to companies or governments with the highest ESG scores. 

ETF investing offers a simple hands-off approach allowing you to put your money into SRI and ethical investment funds, earn decent returns over the long term with minimal risk, and pay much lower fees than you would with an actively managed mutual fund.

A couple of things to keep in mind about socially responsible ETFs:

  • While it’s true that SRI ETFs have a slightly higher MER (the management expense fee charged by the fund itself) than other ETFs, it’s usually only one- or two-tenths of a percent higher—a negligible difference in fee for most individual investors.
  • Be sure to look carefully at the type of companies any given SRI ETF includes since there is no standard definition of what makes an investment socially responsible.

Here's a bit more info on some of these ETFs

This is Canada’s first “all-in-one” ESG exchange-traded fund, which is a great option for those who want the convenience of automatic rebalancing, but without paying a management fee to a robo advisor. Basically, it combines a bunch of BMO’s ESG ETFs into a single fund, weighted 60% into equities and 40% fixed-income assets, and rebalances quarterly. With an MER of just 0.20%, it’s a very low-cost, hands-off diversified SRI solution.

Tim Nash (a.k.a. the Sustainable Economist), calls this fund one of the cleanest large-cap global equity ETFs on the market, as it omits fossil fuels, gambling, alcohol, junk food, uranium and nuclear energy, armaments and militarism, destruction of valuable environments, animal cruelty, chemicals of concern, mandatory detention of asylum seekers, pornography and/or human rights violations. It has mostly U.S. tech and healthcare stocks and comes with an MER of 0.52%.

Nash recommends this fund as a complement to the one mentioned above since it covers the areas ETHI is weak in, such as emerging markets (China, Brazil, and India) and sectors including industrials and consumer staples. SDG screens out companies with low ESG scores and opts for those in the areas of clean energy and other United National Sustainable Development Goals. The MER is 0.49%.

With an MER of 0.12%, this is one of the lowest-fee U.S. equity ETFs that screens out sectors like oil & gas, tobacco, and weapons. However, it does include other businesses that some ethical investors may find problematic (such as pipeline and chemical companies), so weigh that into your investment decision.

Investing in SRI, Impact and ESG stocks

Of course, with an online brokerage account, you aren’t limited to ETFs. You can also invest in other assets—including individual stocks, bonds, or precious metals — which have different per-trade costs associated with them. 

Investing in companies that prioritize sustainable and ethical practices is good for your values and ethics. Here are some top SRI, Impact and ESG stocks to consider:

Name (ticker) Description
Microsoft Corporation (MSFT) A leader in ESG initiatives, Microsoft has committed to being carbon negative by 2030 and has invested $1 billion towards this goal
NVIDIA Corporation (NVDA) Known for its advanced graphics processing units, NVIDIA emphasizes sustainable practices in its operations and supply chain
Apple Inc. (AAPL) Apple has made significant strides in reducing its environmental impact, aiming to have a net-zero carbon footprint by 2030
Tesla Inc. (TSLA) As a pioneer in electric vehicles and renewable energy solutions, Tesla contributes significantly to reducing global carbon emissions
First Solar Inc. (FSLR) A leading provider of photovoltaic solar energy solutions, First Solar focuses on sustainable energy production

The problems with ESG, Impact and SRI investing

While Microsoft, Apple, Tesla, First Solar, and NVIDIA are often considered leaders in innovation and sustainability, certain aspects of their operations or controversies may disqualify them from meeting all ESG (Environmental, Social, Governance), SRI (Socially Responsible Investing), or Impact Investing criteria.

  • Microsoft has faced scrutiny over supply chain labor practices, defense contracts, and allegations of anti-competitive behaviour, raising ESG and governance concerns.
  • Apple encountered criticism for supplier labor conditions, e-waste concerns, and alleged tax avoidance, which challenge its environmental and governance reputation.
  • Tesla criticized for workplace discrimination, controversial cobalt sourcing, and CEO behaviour, raising social and governance red flags.
  • First Solar faces concerns over toxic cadmium use, supply chain transparency, and recycling challenges for solar panels, despite its renewable energy focus.
  • NVIDIA has been criticized for high GPU energy consumption, supply chain ethics, and potential monopolistic practices, which may conflict with ESG criteria.

Closing thoughts: Can any company be 100% ESG?

No company or investment is entirely free from flaws, and socially responsible investing (SRI), ESG, and impact strategies are about striving for progress, not perfection. At least you can align your portfolio with your values while acknowledging the trade-offs inherent in complex global markets.

At its core, SRI and ESG investing are about doing the best we can to drive positive change and support businesses committed to improvement, even if the journey is imperfect.

And getting started with socially responsible investing in Canada is easy, especially with robo advisors offering SRI and ethical investment funds. Using a robo advisor gives you the benefit of diversification and solid returns, as well as lower fees than traditional mutual funds.

Regardless of the online SRI investment approach you choose, you can feel good about where your money is going, while building your nest egg for the future.

FAQ

  • Does socially responsible investing work?

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    Yes, socially responsible investing (SRI) works by encouraging capital to flow toward companies with ethical, sustainable, and socially conscious practices. While its success depends on how you measure "work," it allows investors to align their values with their financial goals, promote positive change, and potentially outperform traditional investments in the long term.

  • Is socially responsible investing profitable?

    +

    SRI can be profitable, with many ESG and impact-focused funds delivering competitive or superior returns compared to traditional investments. Companies with strong environmental, social, and governance practices often demonstrate better risk management, innovation, and long-term resilience, which can translate into financial performance. However, profitability varies depending on fund management and market conditions.

  • Why is ESG important?

    +

    ESG is important because it integrates environmental, social, and governance factors into investment decisions, helping mitigate risks and identify sustainable growth opportunities. It encourages businesses to adopt responsible practices, such as reducing carbon emissions, improving diversity, and ensuring transparency, which can benefit both society and investors by driving long-term value creation.

  • Are ESG funds worth it?

    +

    ESG funds can be worth it if you prioritize aligning investments with values like sustainability and ethics. They offer competitive returns, risk mitigation, and support for companies practicing responsible business. However, not all ESG funds are created equal, so careful research is needed to ensure they meet your financial and ethical expectations.

  • What is impact investing vs. ESG?

    +

    Impact investing actively seeks measurable social or environmental benefits alongside financial returns, often funding projects like renewable energy or affordable housing. ESG, on the other hand, evaluates companies based on their environmental, social, and governance practices as a framework for responsible investment. Impact investing is more proactive, while ESG is evaluative.

  • How big is the impact investing market?

    +

    The impact investing market is significant, with the Global Impact Investing Network (GIIN) estimating its size at $1.2 trillion USD as of 2022. It continues to grow rapidly, driven by increased interest in aligning investments with social and environmental goals, particularly among younger investors and institutional funds.

  • sources

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    1. https://www.riacanada.ca/content/uploads/2024/02/2023-RIA-Investor-Opinion-Survey_Final-Report.pdf

    2. https://www.justwealth.com/performance/#1493846109100-cdb35430-a538

Tamar Satov Freelance Contributor

Tamar Satov, an award-winning writer and editor, specializes in personal finance and parenting. Her work has appeared in Report on Business Magazine, Maclean’s, MoneySense, and other top Canadian publications, making complex topics relatable and actionable.

Tyler Wade Personal finance content strategist & writer

Tyler Wade has worked in personal finance for over 5 years writing for brands like Ratehub, Forbes, KOHO, and now Money.ca.

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