Responsible investing (RI) is going mainstream as more investors come to understand the risks companies face by not improving their environmental, social and governance (ESG) performance.
A 2018 RBC Global Asset Management Inc. survey shows that 84 per cent of institutional investors incorporate ESG factors into their screening process. And a recent Mackenzie Investments survey shows that about one-third of Canadians are keen on increasing their exposure to responsible investments – regardless of whether they currently hold them.
To help investors wade through the growing number of RI-focused investments, we asked four portfolio managers in this space to for some of their top stock picks:
Anne Perreault, sectoral portfolio manager, Canadian equities, at Desjardins Global Asset Management Inc. in Montreal
Her fund: Desjardins SocieTerra Canadian Equity Fund
The first pick: Boralex Inc. (BLX-T)
52-week range: $15.96 to $21 a share
Kingsey Falls, Que.-based Boralex develops, builds and operates renewable energy power facilities in North America, Britain and Europe. Most of its operations are in Canada and France, with a focus on wind and hydroelectric power. Ms. Perreault likes the company’s growth prospects given that countries such as France have committed to increasing renewable energy capacity. What’s more, four of the company’s 11 board members are women, which is above its target of 30 per cent female board members.
The second pick: Maple Leaf Foods Inc. (MFI-T)
52-week range: $26.05 to $35.60 a share
Mississauga, Ont.-based Maple Leaf Foods is a major Canadian consumer packaged-meats company, which is expanding into the meat alternatives arena. “We like its exposure to the growing alternative protein space,” Ms. Perreault says. “This category is growing rapidly … and it’s also good for the planet” as plant-based products produce fewer greenhouse emissions than raising beef. She also likes Maple Leaf’s stated ambition “to be the most sustainable protein company on Earth.”
Annie Laliberté, senior portfolio manager, international equities, at Addenda Capital Inc. in Montreal
Her funds: Addenda International Equity Pooled Fund, NEI International Equity RS Fund and Desjardins SocieTerra International Equity Fund
52-week range: US$25.95 to US$33.85 an ADR
London-based Bunzl provides non-consumable products for the food-service industry, such as disposable tableware, cleaning and safety supplies. The company also helps its customers find more sustainable solutions. A recent example is a move away from plastic straws, which are being banned in a growing number of jurisdictions. Bunzl provides paper straw alternatives. “Bunzl was able to adapt quickly,” to the changing times, Ms. Laliberté says.
52-week range: US$54.36 to US$85.98 an ADR
LVMH is a Paris-based multinational luxury-goods company behind brands such as Louis Vuitton and beauty products provider Sephora. The company recently made headlines when it announced that singer Rihanna would become the first woman to create an original LVMH brand, Fenty (after her full name, Robyn Rihanna Fenty), and the first woman of colour to have her own brand at the company. Ms. Laliberté says LVMH has a commitment to diversity. For example, she says the percentage of women in top management roles at LVMH has risen to 42 per cent in 2018 from 23 per cent in 2007 – and its goal is to reach 50 per cent by 2020. “They’re not just talking about it, they’re making concrete moves to reach their goals,” she says.
Andrew Simpson, director, investment management, at Vancity Investment Management Ltd. in Vancouver
His funds: The IA Clarington Inhance SRI Funds suite of funds
The first pick: Unilever PLC (UL-N)
52-week range: US$50.80 to US$64.10 a share
Unilever is a London- and Rotterdam-based consumer goods company with more than 400 brands in areas such as food, detergents and personal care, which are used in seven out of every 10 households worldwide. Mr. Simpson says Unilever has adopted the United Nations’ Sustainable Development Goals, a blueprint for sustainability, in its corporate overview. “From an ESG analysis perspective, there’s a lot of good stuff going on in the company,” Mr. Simpson says. For example, he says Unilever has committed to using 100 per cent renewable energy in its operations by 2030.
The second pick: Teladoc Health Inc. (TDOC-N)
52-week range: US$42.08 to US$89.05 a share
Dallas-based Teladoc is a virtual health-care technology company that connects doctors with patients over the phone or on the internet to treat a wide range of non-serious illnesses. He says the need for the service is growing as health-care costs rise, particularly in its main U.S. market. “This is one of those companies where we expect to see a hockey-stick-style growth in revenue,” he says, citing catalysts such as new relationships with large U.S. health organizations such as CVS Health Corp. and UnitedHealth Group Inc. Mr. Simpson sees Teladoc Health growing in other areas such as mental-health services. He says the stock addresses the societal need for better access to health-care services while also giving investors an opportunity to profit from new health-care technology.
Martin Grosskopf, vice-president and portfolio manager at AGF Investments Inc. in Toronto
The fund: AGF Sustainable Growth Equity Fund
The first pick: Ecolab Inc. (ECL-N)
52-week range: US$135.77 to US$200.93 a share
St. Paul, Minn.-based Ecolab is another long-term holding in the AGF fund. The company is known for providing commercial cleaning solutions for public washrooms, but its services extend to water, hygiene and energy technology offerings for the food, energy, health-care and hospitality industries. For example, the company provides chemicals that beef and poultry processors use to reduce pathogens, such as E. coli and salmonella. Mr. Grosskopf expects Ecolab to generate earnings growth of 12 to 15 per cent in the next few years. The company provides a way to invest in the increasing demand for clean water, the growing risk of food infections and the need for sanitation products in emerging countries.
The second pick: Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI-N)
52-week range: US$18.83 to US$28.53 a share
Hannon Armstrong Sustainable Infrastructure Capital, based in Annapolis, Md., is a real estate investment trust (REIT) that provides financing for energy efficiency and renewable projects in North America. Mr. Grosskopf’s fund has held the REIT since it went public in 2013. “It’s probably the only financial company that we’ve found that is 100-per-cent exposed to the theme of reducing carbon and moving toward renewable [energy],” he says, adding that it’s also “a defensive name” given its 5-per-cent yield. Mr. Grosskofp says the REIT also has performed well regardless of the interest rate environment.