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With MERs as low as 0.15%, these investments are for those who want to bring positive change to the world while also earning a return.
When I started my Sustainable Economist blog in 2012, there were only a small handful of socially responsible and green Exchange Traded Funds (ETFs). With so few options available, it was challenging to create model portfolios that were properly diversified. My, how times have changed! It feels like new sustainability ETFs are coming out all the time, and now my challenge is to stay on top of them all.
For those new to this type of investing, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. Some avoid businesses involved in tobacco, alcohol, gambling, pornography, fossil fuel production, and guns.
This year, I’m introducing two new model portfolios for those looking for an investment strategy that takes into account both the financial strategy and the social/environmental good to bring out a positive change in our world. I outline them below.
The Vanguard Cheap & Easy ESG Portfolio
| Asset Class | Allocation | ETF Name | Ticker | MER | Currency |
| US Equity | 30% | Vanguard ESG U.S. Stock ETF | ESGV | 0.12 | USD |
| Int’l Equity | 30% | Vanguard ESG International Stock ETF | VSGX | 0.15 | USD |
| Gov’t Bonds | 40% | Vanguard Canadian Government Bond Index ETF | VGV | 0.28 | CAD |
I’ve long admired Vanguard’s unique ownership structure and their mission to keep fees low for investors. Imagine my excitement when they launched their new ETFs with a socially responsible mandate. I even got to write about their pros and cons for MoneySense at that time.
This portfolio is by no means perfectly sustainable, but it is hyper diversified and very cheap with a total Management Expense Ratio (MER) of just 0.19%. It is a step in the right direction for people who want to dip their toes into sustainable investment strategies. Curiously, Vanguard’s Canadian Government Bond ETF (VGV) is not the cheapest Canadian government bond ETF on the market so investors can lower their total MER to 0.15% by swapping it out for less expensive options offered by BMO and iShares.
The iShares Impact Portfolio
| Asset Class | Allocation | ETF Name | Ticker | MER | Currency |
| Canadian Equity | 15% | iShares Jantzi Social Index ETF | XEN | 0.55 | CAD |
| US Equity | 15% | iShares MSCI KLD 400 Social ETF | DSI | 0.25 | USD |
| Int’l Developed Equity | 10% | iShares ESG MSCI EAFE ETF | ESGD | 0.2 | USD |
| Int’l Emerging Equity | 5% | iShares ESG MSCI EM ETF | ESGE | 0.25 | USD |
| Impact Equity | 15% | iShares MSCI Global Impact ETF | SDG | 0.49 | USD |
| Canadian Bonds | 30% | iShares 1-10 Year Laddered Government Bond Index ETF | CLG | 0.17 | CAD |
| Impact Bonds | 10% | Oikocredit GIC / Term Deposit | 0 | CAD |
iShares has long been a leader in socially responsible ETFs, having created the Canadian flagship Jantzi Social Index ETF (XEN) back in 2007. More recently, they’ve expanded their lineup of socially responsible ETFs. I expect more to launch in the coming years as Blackrock CEO Larry Fink sees sustainable investing as a massive trend, and predicted in a recent interview that it will become “a core component of how everyone invests in the future… We are only at the early stages”.
Slightly more expensive with a total MER of 0.28%, this approach is for investors who want to go beyond “doing less evil” by carving out part of their portfolio for investments that are ‘doing more good’. It includes the iShares MSCI Global Impact ETF (SDG), which invests in companies that provide goods and services aligned with the United Nations Sustainable Development Goals. It also includes the Oikocredit GIC/Term Deposit, an amazing investment that generates a stable financial return while providing micro-loans to entrepreneurs and co-ops in emerging economies. The Oikocredit GIC is available to Ontario investors through Kindred Credit Union and the Oikocredit Term Deposit is available to B.C. residents through Vancity.
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Tim Nash is Founder of Good Investing, an investment coaching firm that empowers everyday people to manage their own money according to their values.
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Hi.
I’m fairly new to investing and am looking to set up a long-term, low-maintenance portfolio. I don’t want to invest in things that I wouldn’t feel good about funding directly. I’m looking at the holdings in your second portfolio here and am seeing, for example, over 11% in the first one invested in oil sands, and the second ETF holds companies like Pepsi, Coke, and MacDonalds.
I’m having a very hard time finding an ETF portfolio that is actually SRI. I get that it won’t be perfect, but the above companies are direct contributors to the dire state of the world.
Are there any other options?
Thank you!
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