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number cruncher

What are we looking for?

Top-yielding, sustainable exchange-traded funds.

The screen

In an effort to control inflation, the Bank of Canada is widely expected to start raising interest rates on March 2. For income-seeking investors, this might mean getting better yields from bond portfolios as a consequence of falling bond prices.

However, given that rates aren’t expected to rise astronomically, investors are likely still looking for ideas to supplement income needs. Today, we seek to flush out some of these ideas in the ETF space, while keeping an eye on sustainability. To do so, I used Morningstar Direct to screen the 1,274 Canadian-domiciled ETFs for those that follow a sustainable investing approach, as defined by Morningstar’s analysis of prospectus documents.

Morningstar broadly flags sustainable investments in three ways: 1) those that use environmental, social or governance factors as a core input to their investment decision process; 2) those that seek to make a measurable impact around core themes such as gender and diversity or reduction of fossil fuels; and 3) those that invest broadly in an environmental sector, like water or clean technology. These criteria are not mutually exclusive, and fund managers are known to use more than one approach.

Given that the Canadian securities regulators only recently released guidance on how fund manufacturers are to disclose their ESG-related approaches in prospectus documents, the landscape may very well change over the coming year as funds renew their filings. For now, Morningstar has identified a list of funds based on existing language.

More about Morningstar

Morningstar Research Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Morningstar offers an extensive line of products and services for individual investors, financial advisers, asset managers, retirement plan providers and sponsors, and institutional investors. Morningstar Direct is the firm’s multi-asset analysis platform built for asset management and financial services professionals. Morningstar Canada on Twitter: @MorningstarCDN.

What we found

Sustainable ETF funds for yield-seeking investors

FundTickerMorningstar CategoryMER (%)12M Trailing Yield (%)YTD Ttl. Rtn. (%)1Y Ttl. Rtn. (%)3Y Ann. Ttl. Rtn. (%)5Y Ann. Ttl. Rtn. (%)Inception Date
iShares Global Water ETF CommCWW-TSector Equity0.663.3-14.58.513.812.26/4/2007
BMO ESG US Corp Bond Hdg to CAD ETFESGF-TGlobal Corp. Fixed Inc.0.233.1-5.7-5.3n/an/a1/15/2020
BMO ESG Corporate Bond ETFESGB-TCanadian Fixed Income0.173.1-4.3-4.3n/an/a1/15/2020
Invesco ESG Canadian Core Plus Bond ETFBESG-TCanadian Fixed Income0.493.0-5.8-
Desjardins RI Active Can Bd Low CO2 ETFDRCU-TCanadian Fixed Income0.423.0-4.8-4.11.8n/a9/27/2018
RBC Vision Women's Ldrsp MSCI Cnd ETFRLDR-NECanadian Equity0.293.0-2.114.911.6n/a3/5/2018
BMO MSCI Canada ESG Leaders ETFESGA-TCanadian Equity0.172.8-6.89.6n/an/a1/15/2020
BMO MSCI EAFE ESG Leaders ETFESGE-TInternational Equity0.282.7-6.31.0n/an/a1/15/2020
Desjardins RI Em Mkts MF Low CO2 ETFDRFE-TEmerging Mkts. Equity0.742.51.0-3.1n/an/a3/7/2019
Desj. RI Dev exUSA exCan MF LowCO2 ETFDRFD-TInternational Equity0.692.5-

Morningstar Direct; data as of Feb. 22

Though the list of ETFs that follow a sustainable investing approach includes close to 100 options, I sorted it based on their 12-month trailing yield and have displayed the top 10 in the table, alongside their Morningstar category, management expense ratios, trailing returns and inception dates.

This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.

Ian Tam, CFA, is director of investment research for Morningstar Canada.

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