The Indexes and the Funds
All of the funds and indexes focus on larger companies. It may well be that smaller companies could score equally well but they have not been assessed or rated.
- Thomson Reuters Developed Markets (ex-US) ESG Index
- TSX 60 ESG Index, based on RobecoSAM Corporate Sustainability Assessment
- Stoxx Global ESG Leaders Index
- iShares Jantzi Social Index ETF (XEN) - Canada's sole SRI-focussed ETF
- NEI Ethical Canadian Equity Fund - a mutual fund, the largest SRI fund in Canada; holdings as of 31 Mar 2014 obtained from SEDAR in the fund's interim financial statement
- Desjardins Environment Fund - mutual fund, holdings also as of 31 Mar 2014, from SEDAR
- PH&N Community Values Canadian Equity Fund - mutual fund, holdings as of 31 Dec 2013, from SEDAR
- HowToInvestOnline - though we did not use this to rank the companies, we've included our own ESG assessment results from various past posts listed in our Guide post under Socially Responsible Investing
The comparison table below shows that five companies are in every single index and fund; they are the veritable beauty queens of SRI:
Following on are a group of four "princesses", appearing in six out of seven lists, and another eight companies amongst our still very attractive "debutantes", featuring in five out of seven. In every case where we had actually rated these companies in our own posts, we had found them to be very acceptable from a Sustainability (yet another term that is used more or less inter-changeably with SRI and ESG) perspective.
Surprise - Every company in the ordinary TSX 60 index made it into at least one SRI / ESG fund or index list. In our analysis we discovered that every company in the regular TSX 60 index, based on market cap to represent leading sectors and companies from a financial point of view, also shows up in a SRI/ESG list. An ETF based on the TSX 60 index, such as iShares' XIU, might thus be considered a lowest common denominator SRI fund. Beauty is in the eye of the beholder and it seems everyone is indeed beautiful in someone's eye.
The Belles and Stock Performance
Our second comparison table below shows that the top-rated beauty queens did indeed turn out out very attractive numbers for total stock return (capital gains plus dividends), return on equity and beta (a measure of volatility relative to the market, where 1.0 is the market average, in this case the TSX 60 ordinary market cap index, while below 1.0 is more stable, less volatile, less risky stock price).
The princesses also did very well but performance has not been nearly as good amongst the debutantes.
Bottom line: For those concerned only about financial performance, consistently high ESG ratings can be a useful extra dimension to add to a stock evaluation since the very top of the list seems to be occupied by very successful, safe and profitable companies. For those concerned about ethics, companies with consistent high ratings probably will meet most people's approval. At the very least, the list of the top companies can be a useful starting point for drilling into the details of a company to examine its behaviour on the dimensions of particular interest to the individual investor.
Disclosure: This blogger directly owns shares of BNS, CNR, SU, BMO,RY, BCE and TCK.B as well as all the companies listed through ETFs.
Disclaimer: This post is my opinion only and should not be construed as investment advice. Readers should be aware that the above comparisons are not an investment recommendation. They rest on other sources, whose accuracy is not guaranteed and the article may not interpret such results correctly. Do your homework before making any decisions and consider consulting a professional advisor.