This new ETF offers a challenge to socially responsible investing skeptics. Plus, four ways to make money in sideways markets

If you think socially responsible investing is a sham, there’s a new exchange-traded fund you should check out.

The Mackenzie Corporate Knights Global 100 Index ETF (MCKG-NE) holds a portfolio of 100 global sustainability leaders chosen through a screening system developed by a media and research company called Corporate Knights, which specializes in the sustainable economy.

Think of MCKG as an option for your global equity exposure, which might conceivably account for about 20 to 40 per cent of a total portfolio. North American companies account for 35 per cent of the portfolio, Western Europe for 39 per cent and the Asia-Pacific the rest. The management expense ratio comes in a bit above 0.5 per cent, which is reasonable for a fund of this type.

MCKG hits the market at a time when socially responsible investing is retrenching after a boom in 2020-21. Pretty much everything in the investing universe was set back last year, but SRI has faced additional headwinds in the form of a backlash against the idea of choosing investments based on environmental, social and governance (ESG) factors. The skeptics say there’s no performance benefit, and that ESG is mainly about optics.

What the skeptics don’t get about socially responsible investing is that it’s not laser-focused on generating the best returns. Rather, it’s a way to support companies that emphasize sustainability and mitigate the risks of doing business with little or no regard for ESG factors. In doing so, returns will follow.

“Our strategy shows that it’s not inevitable, but it is indeed possible to invest in sustainable companies and do well by doing it,” said Toby Heaps, president and co-founder of Corporate Knights.

MCKG has some strong performance numbers in back-testing. But as a wise investing person once noted, what new fund doesn’t come to market with strong back-tested results? In this case, the Canadian-dollar version of the underlying Corporate Knights Global 100 Index produced a 12.8 per cent average annual gain for the 10 years to Dec. 31, while the benchmark MSCI All Country World Index made 11.4 per cent. The Corporate Knights index lost 9.5 per cent last year, while the MSCI ACWI lost 12.4 per cent. Take roughly 0.5 of a percentage point off those Corporate Knights returns to reflect the cost of owning MCKG.

The Corporate Knights 100 is built using a process that puts a 50 per cent weight on the nature of a company’s products and services, and another 50 per cent weight on the corporate behaviour. Behavioural factors are based on specifics like the diversity of corporate boards, CEO pay compared to the average workers’s pay and taxes paid.

Certain sectors are excluded, like companies that make a majority of their revenue from weapons and those that lobby against climate policies. But as you’ll notice in the top holdings, resource companies are not excluded. Among the Top 10 are Tesla (TSLA-Q), Cascades Inc. (CAS-T) and Teck Resources (TECK-B-T). The index has already been chosen by Goldman Sachs for use in building private wealth portfolios.

-- Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

The Rundown

Four ways to make money in down and sideways markets

No one is quite sure where the stock markets are going next. We’ve seen a strong rebound from the March lows, which is encouraging. But worries about a recession cloud the outlook for the coming months, leaving investors wondering what to do. In Gordon Pape’s experience, there are four ways to make money in sideways or down markets. Here he outlines what they are.

AT&T was walloped last week. Should telecom investors be worried?

Telecom stocks should be relatively safe bets. In good times and bad, consumers tend to keep their phones and other connections, offering a stable source of revenue to back attractive quarterly dividends. But after AT&T’s share price fell 10.4 per cent on Thursday amid its latest earnings report, its steepest one-day sell-off since the dot-com meltdown in 2000, telecom stocks suddenly look vulnerable to the challenges weighing on other economically sensitive areas of the market. David Berman explores what it may mean for Canadian investors.

China rebound buoys hopes for stronger-than-expected U.S., Europe earnings

Concerns are growing that tightening credit will dent the global economy. But recent data and upbeat comments from major companies like LVMH, Europe’s most valuable listed company, about business in China have given investors some cause for optimism. That could help extend a two-month long winning streak in global stocks after March’s turmoil in the banking sector led investors to slice earnings estimates. Reuters’ Joice Alves reports from London.

Also see:

Lessons learned from a manic March. A market crisis scorecard

Tech earnings to test markets’ ‘most crowded’ trade

Evaporating equity risk premium herds funds to bonds

Value investing may finally be emerging from its decade-long slump

Many of the attendees at last week’s Value Investing Conference in Toronto had a definite spring in their step. It wasn’t because value stocks had achieved spectacular results over the past year. It was because they had finally succeeded in doing somewhat better than their flashier rivals. After years of ugly performance by the value contingent of the stock market, this was close enough to qualify as success. Ian McGugan takes a look at whether this is a trend with staying power.

Others (for subscribers)

The most oversold and overbought stocks on the TSX

Monday’s analyst upgrades and downgrades

Globe Advisor

Big week in U.S. tech earnings in Advisor Lookahead

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis.

Ask Globe Investor

Question: I have a RRSPs and TFSAs in my self-directed portfolios. As I start to enjoy retirement, I sometimes like to go off grid. Rather than take the chance of some disaster happening and losing principal while I’m away I prefer to simply sell everything and hold cash, then buy back in when I get home. I sleep better that way. Interest rates have been so low the past few years it didn’t bother me to just leave it sit, but now things have changed. Where do you suggest that I put my cash while I’m away? I typically go for two to eight weeks at a time. Thanks for your help. - Dennis P.

Answer: This is certainly an unusual strategy – in fact, I’ve never heard of anyone using it before. You may sleep better at night but all this trading in and out is costing you commissions. Even if you deal with a discount broker, those expenses add up over time. Then you must consider how much you are losing if the market rises while you’re on the sidelines.

I have four suggestions for you. The first is to restructure your portfolio so that you can go away for a few weeks and not worry about it. A combination of conservative, dividend paying stocks and some fixed income securities would achieve that goal.

The second thought is not to cut yourself off completely from the outside world. Use your phone to check the markets and the status of your portfolio every few days. If you don’t like what you see, call your broker and take action.

Thirdly, enter stop-loss orders on any security you’re concerned about. If the price falls below the stop level, your broker will sell. Of course, if the stock rebounds the next day, you’re out of luck.

Finally, if you’re determined to stick with your current plan, put the cash in a high-interest savings account while you’re away. The problem is you will be limited in your choices to those offered by the financial institution with which you’re dealing. For example, Scotiabank currently offers 4.6 per cent for 150 days on its Momentum PLUS Savings Account. But I doubt you want to close all your existing accounts and move the money over there for a few weeks.

I think you should reconsider your approach. There are more effective ways to deal with a temporary absence.

--Gordon Pape (Send questions to gordonpape@hotmail.com and write Globe Question on the subject line.)

What’s up in the days ahead

Are alternative investments worth your bother? Tom Czitron, a former fund manager who worked in the business, will share his thoughts.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

Compiled by Globe Investor Staff