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Investing with your conscience | MoneySense

July 3, 2020 Bryan Borzykowski
Investing with your conscience | MoneySense

Photo by Christina @ on Unsplash

One of the byproducts of both COVID-19 and recent racial unrest in North America is that people are thinking more carefully about the values of the companies they do business with. Many Black-owned businesses have reportedly seen sales increases and more customers coming through their doors since the protests began, while other businesses, such as Ben & Jerry’s, have received plaudits for their pro-protest statements or for their positive employee COVID-19 policies. 

On the flipside, there was considerable backlash when CrossFit’s CEO reportedly said the company didn’t mourn George Floyd’s death. Amazon has come under fire for allegedly not properly protecting its warehouse staff from the coronavirus. Many smaller and medium-sized companies have also been chastised for comments they’ve made or actions they’ve taken over the last few months. 

While engaging with brands that share your values isn’t new (see Chick-fil-A), it seems the saying “put your money where your mouth is” has never been more relevant than it is right now. 

ESG assets soar

This is also true for investors who, over the last few months, have been clamouring to buy products that take environmental, social and governance (ESG) factors into account. According to TD Securities, $740 million have flowed into Canadian ETFs that focus on ESG principles, up from $142 million in 2019. There are also now 38 ESG-related ETFs to choose from in Canada and many more in the U.S. and around the world. 

Part of the reason why there’s been such an uptake in ESG funds is that over the last couple of years the industry has created a handful of products that focus on more specific values, like gender and racial diversity. Historically, ESG investing has focused on the environment, with those wanting a more energy-efficient future choosing to exclude oil and gas stocks from their portfolios. Other ESG investors avoid casinos and tobacco companies. 

But with millennials (and others, but mostly millennials) showing that they care about how the companies they deal with treat women employees or what the businesses they frequent say about racial unrest, fund operators have started to create more values-based products that focus more on the “S” and the “G” in “ESG.” 

More diverse ETFs offerings

In 2019, ETF provider Impact Shares worked with the National Association for the Advancement of Colored People (NAACP) to create NACP, an ETF that allows investors to buy into a basket of companies, such as Amazon, Apple and Google, that have strong racial and ethnic diversity policies in place. The company also has an ETF (SDGA) that provides exposure to companies, such as Microsoft, Procter & Gamble and Nestle, that have strong policies and practices relative to the 17 United Nations Sustainable Develop goals, and an ETF (WOMN) that holds companies that support women empowerment and gender equality. 

In Canada, most of the values-based ETFs are focused on gender diversity. There’s the RBC Vision Women’s Leadership MSCI Canada Index ETF (RLDR), which holds Shopify, Enbridge, TD Bank and others that have demonstrated a commitment to gender diversity, Mackenzie’s Global Leadership Impact ETF (MWMN), owns companies (Lululemon, Starbucks, Estée Lauder) that promote gender diversity and women’s leadership, while Fidelity has a Women’s Leadership mutual fund that owns companies (Salesforce, Accenture, Adobe) that prioritize and advance women’s leadership and development. 

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