Your guide to socially responsible investing in Canada
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 WealthsimpleWhat are socially responsible investments?
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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 |
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◦ 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 |
Wealthsimple review | Questwealth review | JustWealth review |
Auto invest with Wealthsimple | Auto invest with Questwealth | Auto invest with JustWealth |
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).
2. Open a brokerage account to buy stocks, ETFs and mutual funds
Wealthsimple self-directed | Questrade | TD Direct Investing |
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◦ 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. |
Wealthsimple review | Questrade review | TD Direct Investing review |
Visit Wealthsimple | Visit Questrade | Visit TD Direct Investing |
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
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 |
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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
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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.
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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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