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Socially Responsible Investing


 Let financial value and your values share centre stage when
 choosing your bank or investments
                                                 Page 2
                                                 Green stock picks
                                                 5 experts weigh in on how
                                                 —and what—to choose

                                                 Page 5
 PART 2 IN A SERIES                              On the market
                                                 Our expert in socially
 about making greener                            responsible investing
 choices, presented by                           brings us up to speed

 Green Living Enterprises                        Page 6
                                                 What’s out there
                                                 A round-up of select Canadian
                                                 and U.S. socially responsible
                                                 investment options

                                                 Page 8
                                                 Banking on green
                                                 How Canadian banks are
                                                 promoting eco-action

                                                 Page 11
                                                 Glossary of terms

                                                 Green Living has been
                                                 helping both consumers
                                                 and businesses navigate
                                                 environmental and social
                                                 responsibility for over 10
                                                 years. Producer of the
                                                 Green Living Show and
                                                 Green Living also
                                                 provides marketing and
                                                 communications services to
                                                 responsible businesses.

April 2011
Socially Responsible Investing:
Green stock pics

Green stock picks
5 experts weigh in on how—and what—to choose

                                                If you’ve ever opened an account with a brokerage
                                                you know that investing in stocks is a challenge. If it
                                                weren’t, there wouldn’t be such a huge industry in in-
                                                vestment advice or in mutual funds.
                                                   Buying stocks in early 2011 is also complicated by
                                                the fact that the S&P/TSX Composite is up more than
                                                65% since early 2009. Bullish market watchers see
                                                room for continued growth, but the market can’t re-
                                                main on its current trajectory forever.
                                                   Still, there are good reasons to consider stocks—es-
                                                pecially if you’re an educated investor looking to build
                                                an environmentally and socially responsible portfolio.
                                                You’ll still need to be pretty good at picking stocks
                                                but—the big key—you’ll have free rein to tailor your
                                                holdings to your values and responsibility standards.
                                                   How much does this matter? A lot, says Alan Har-
                                                man, a director at ScotiaMcLeod and a veteran in-
                                                vestment adviser in the socially responsible field. Say
                                                you’re an investor who has decided you’d like to target
                                                your investments towards alternative energy. If you
                                                buy a generic Canadian Socially Responsible fund,
                                                you’ll have to be prepared to own shares in Suncor,
                                                a big player in the oilsands. “Suncor will be in pretty
                                                much every portfolio because they always rank very
                                                high on the SRI indices,” says Harman. “But if you’ve
                                                got strong negative opinion on the oilsands, you’re not
                                                going to want to buy Suncor. The nice thing about buy-
                                                ing individual stocks is that you can decide that.”

                                                Where to begin?
                                                Harman, who does advisory work for small not-for-
                                                profits and church organizations, says he approves of
                                                several large technology companies. “One of my fa-
                                                vourite examples of the last couple of years is Google,”
                                                says Harman. “It’s a stock that doesn’t always make
                                                it into a lot of standard portfolios because it’s always
                                                considered risky, on a number different metrics it’s
                                                considered expensive. Yet it’s the perfect example of a
                                                company that has done all kinds of things right, and
                                                where, I think, their social responsibility, their good
                                                corporate citizenship has also added to the bottom
                                                line. I think that they’ve attracted talent because of

                                                                         GREENLIVINGONLINE.COM 2
Socially Responsible Investing:
Green stock pics

                 their good corporate citizenship and retained talent for    the analysis a step further and crosscheck the Jantzi
                 the same reason. We’ve always had a fair bit of Apple       list against a summary of analyst recommendations,
                 for similar reasons.”                                       the following firms show the strongest buy recom-
                    Harman also buys a lot of Canadian stocks. As an         mendations: Cascades, Gildan Activewear, TD Bank,
                 adviser, he balances his fiduciary responsibilities to      Loblaw and Brookfield Properties.
                 his clients with his preferences for the most socially
                 responsible companies. In our domestic market, that         Sector shopping
                 means he avoids gold companies and shops lightly            As long as you maintain a diversified portfolio over-
                 from the resource sector. Companies in those sectors        all, it never hurts to invest in companies in hot sector;
                 appear in many pre-packaged socially responsible            if the sector has staying power, even better. We asked
                 portfolios, but their environmental practices make          Timothy Nash, a Toronto based sustainable investing
                 him uncomfortable. Instead, Harman sticks mainly            consultant and president of Strategic Sustainable In-
                 to the big banks in finance, large telecoms and oth-        vestment, what sector looks good today. His answer:
                 er larger firms that offer tangential exposure to the       energy efficiency. “Buildings and electricity grids are
                 strong resource and commodities markets. “There are         getting smarter,” says Nash. “As we identify and elim-
                 some companies that do a lot of really great things—I       inate waste, the financial and environmental benefits
                 think Scotiabank, quite frankly, is one of them. And I      are obvious.” It is, he says, “truly the ‘low hanging
                 think that [having that SRI credibility] helps, certainly   fruit’ of the green transition.”
                 in our international jurisdictions, it helps our attrac-        He singles out three companies in this space:
                 tiveness to potential clients and therefore our profit-     Schneider Electric SA (Euronext:SU); EnerNOC
                 ability.”                                                   (NASDAQ:ENOC); and Johnson Controls (NYSE:JCI).
                                                                                 Schneider is a global leader in energy management
                 Individuals less constrained                                systems, says Nash. They provide the hardware and
                 Investors picking their own stocks aren’t quite so con-     software that buildings need to track and automate
                 strained. A good place to start looking for socially        the use of energy, water and heat. Just by measuring
                 responsible candidates is Maclean’s Jantzi-Sustaina-        real-time use and eliminating obvious waste, facili-
 What sector     lytics’ ranking of Canada’s most socially responsible       ties can easily reduce energy consumption by 20% to
 looks good      companies. It weighs a wide range of environmental,         30%, which becomes even more attractive as energy
 today? Energy   social and governance factors to come up with the           prices rise.
 efficiency,     ranking. The big five banks—BMO, TD, RBC, Scotia                EnerNOC specializes in ‘demand response,’ which
 says            and CIBC—are all on the list.                               levels out the peaks and valleys of energy demand over
 sustainable        Suncor, as Harman noted, is also a standout on the       the course of a day. As Nash says, energy is now more
 investing       ranking. But if an investor is interested in alternative    expensive at certain times (when demand is high),
 consultant      energy and cleantech and would rather steer clear of        so facilities can save lots of money by being smarter
 Timothy Nash    the oilsands, the Jantzi ranking also includes West-        about when they use it. This technology also helps
                 port Innovations (TSX:WPT-T), a smaller yet well-es-        the environment, as utilities will often turn to dirtier
                 tablished company with technologies that enable die-        sources of energy when demand peaks.
                 sel engines to run on cleaner fuels like natural gas and        Johnson Controls, meanwhile, makes equipment
                 biomethane. Harman acknowledges that Westport’s             and components, from HVAC systems to refrigera-
                 products are good for the environment, but he says          tion, for green buildings. Nash also likes that the com-
                 its small size makes it a challenge for the more con-       pany’s diversified: it also supplies batteries for hybrid
                 servative investor. Nevertheless, as of mid-April 2011,     and electric cars.
                 Westport shares were trading in the $20-$26 range, a
                 significant increase from lows of between $4 and $6 in      What the experts like
                 the aftermath of the 2008-2009 market crash. Where          Another place to look for potential stocks to buy is
                 Westport’s shares might be headed in the coming year        in the holdings of good, independently managed SRI
                 is tougher to predict. Investment analysts who rate         funds. Elsewhere in this report, Nash singles out
                 the stock are evenly divided—some have it listed as a       Greenchip Global Equity Fund, run by Greenchip Fi-
                 “strong buy” while others have it pegged as a “sell.”       nanacial, sister company of Investeco Capital in To-
                    Strong post-crash stock performance is a trait of        ronto. (Full disclosure: Investeco and Green Living
                 most of the companies on the Jantzi list—yet for many,      Enterprises have a common owner). So we encour-
                 share price growth has leveled off. However, if we take     aged Greg Payne, Greenchip Fund’s manager, to tell

                                                                                                       GREENLIVINGONLINE.COM 3
Socially Responsible Investing:
Green stock pics

                  us about some of his favourite companies in the fund.        cal environment in electrical substations and enable
                  Payne cited these eight:                                     utilities to remotely monitor the performance of their
                     Pure Technologies (TSX-V:PUR) provides advanced           equipment.
                  technologies for the inspection, assessment, monitor-           The opportunities in these kinds of companies and
                  ing and management of critical infrastructure includ-        sectors also get a strong endorsement from Nicholas
                  ing bridges and water pipelinesuses, ultimately saving       Parker, chairman and co-founder of the Cleantech
                  money and water. Its revenue has grown from less than        Group. Ideally, Parkers tells investors to look for areas
                  $10 million in 2006 to more than $40 million in 2010.        of convergence, what he calls “nexustech.” This refers
                  Much of its customer base is in the U.S. and Africa,         to such things as products/companies with solutions
                  serving both customers with aging infrastructure, as         that simultaneously meet energy-food-water challeng-
                  well as new developments in which Pure’s technology          es. “An illustration would be an energy-efficient water
                  can be incorporated from the outset. “They’ve carved         pump for agriculture,” he says. Or, “a home automa-
                  out a unique niche,” Payne says. “Technologically,           tion system that provides security, entertainment and
                  they seem to be one step ahead.”                             energy management.”
                     New Flyer Industries (TSX:NFI.UN) is a leading               Tom Rand, an engineer, investor who heads the
                  manufacturer of alternative energy buses for urban           Cleantech and Physical Science Venture Group at the
                  transit fleets. A recent management change has im-           MaRS Centre in Toronto and author of Kick the Fossil
                  proved its operating margins, notes Payne. He also be-       Fuel Habit: 10 Clean Technologies to Save Our World,
                  lieves the long-term future is bright given the inevita-     also sees the emerging low-carbon economy holding
                  bly greater emphasis we’ll see in cities on public transit   the most opportunity. “That includes smart grid, re-
                  in a lower-carbon-consuming future.                          newable energy, energy efficiency and clean transpor-
                     Ram Power (TSX:RPG) is an emerging player in              tation,” says Rand. “Any technology that can reduce
                  the supply of utility-scale geothermal power—ex-             fossil fuel use will become more and more valuable.”
                  tracting steam and hot water from deep in the earth
                  to drive turbines and supply electricity. It has a major,    Take a long view
                  82-megawatt project coming online next year in Nica-         Just as that’s a long list of companies, issues and strat-
 The emerging     ragua. This and other developments, Payne says, make         egies to digest, Timothy Nash cautions investors in en-
 low-carbon       its shares “pretty attractive.”                              vironmental and socially responsible sectors to keep
 economy             Newalta (TSX:NAL) is a Canadian provider of waste         the longer-term horizon in mind at all times. “Invest-
 holds the most   processing and recycling services to the materials in-       ors in green sectors should understand that it can be
 opportunity,     dustry. It is a leader in handling waste and process         volatile,” says Nash.
 says engineer,   water from the oil industry, with the double benefit of         At the same time, he stresses that every inves-
 investor and     cleaning up and recovering valuable oil.                     tor should be looking at these sectors—not just
 author Tom          Biox (TSX:BX) is a Oakville, Ont.-based producer          environmentally conscious investors. “Every one

                  of biodiesel that uses a flexible process that can switch    should have at least some exposure,” says Nash.
                  input sources according to that which affords the best       “Or they risk losing out on the next big boom.”
                  margins. It handles everything from yellow grease and
                  beef tallow to more traditional inputs such as soy or
                  palm oil.
                     Itron (Nasdaq:ITRI) is a global leader in utility me-
                  tering, providing meters in the U.S. and internation-
                  ally to monitor electricity, gas, and water consump-
                  tion. Its “OpenWay” technology is at the forefront of
                  smart meters, with recent large contract installations
                  in California.
                     International Rectifier (NYSE:IRF) makes power
                  management semiconductors that help electronic de-
                  vices and machines manage and improve the efficien-
                  cy of their power consumption.
                     RuggedCom (TSX:RCM) specializes in rugged
                  communication technology (routers and switches)
                  that can withstand the extreme climate and electri-

                                                                                                         GREENLIVINGONLINE.COM 4
Socially Responsible Investing:
On the market

On the market
Our expert in socially responsible investing brings us up to speed

Green Living: What’s the state of socially respon-            (ETFs are funds that are listed on an exchange
   sible investing in Canada today?                           and trade like stocks)?
Andrew Heintzman: Europe is probably seven                AH: That’s probably still the core of their world.
   years ahead of us and that the U.S. is probably            And for those with their own discount bro-
   three years ahead.                                         kerage account or who are picking their own
                                                              stocks, there’s also the option to invest directly     Andrew
GL: How is the market evolving?                               in stocks of companies in these sectors.               Heintzman is
AH: When we started Investeco in 2000, there                                                                         President & CEO
     was really only one kind of product in the           GL: What makes SR investing attractive?                    of Investeco
     market, a kind of screened fund, the generic         AH: There are a lot of really interesting higher-          Capital and
     socially responsible fund. These tended to be             growth, early-stage companies in cleantech            chair of the
     negatively screened entities (excluding sectors           and other sectors that probably don’t fit into        Premier’s
     like armaments, tobacco or alcohol). So their             some of the larger portfolios. The rationale to       Climate Change
     holdings didn’t look much different than other            invest in them is growth, future opportunity.         Advisory Panel
     mutual funds — resource companies, banks,                                                                       for the Province
     insurance companies and telcos.                      GL: Does investing in that space carry greater             of Ontario.
                                                               risks?                                                He sits on the
GL: What came next?                                       AH: It requires more research, probably, because           board of Green
AH: A more sectoral type of investing. So rather               there’s less research being done by the market.       Living.
     than just avoiding certain companies or cer-              And they tend to be a bit more volatile. It re-
     tain sectors, you’d allocate capital toward               quires a bit more attention.
     areas of the economy that you felt the capital
     needed to go to. And that now has broken into        GL: What about fallout from the crash? Markets
     a more complex series of subsectors and sets             are back, but were there specific impacts on
     of funds. And with that you also get mission-            socially responsible investing?
     based investing and impact investing where a         AH: I’d say there are two. And they’re diametrical-
     fund may choose to invest very specifically in           ly opposed. Following a crash, there’s a kind
     water companies or water funds. They’re al-              of general conservatism that prevails, people
     locating capital to try to see a change in the           just play it safe, maybe even get out the market
     economy.                                                 totally. But on the flip side, people realize that
                                                              conventional wisdom in the market is often
GL: Is this now available to retail investors? Or is it       wrong. And so people may be looking for risk
     still mostly for institutional, private?                 abatement, or they may be looking for new

AH: The options have not yet become fully avail-              opportunities. I think that would send more
     able to the average retail investor in Canada,           people to sniff out these sectors.
     but it eventually will.
                                                          Andrew Heintzman’s latest book, The New
GL: So retail investors are still largely limited to      Entrepreneurs: Building a Green Economy for the
     SR mutual funds and exchange traded funds            Future, can be purchased at

                                                                                                                   GREENLIVINGONLINE.COM 5
Socially Responsible Investing:
What’s out there

What’s out there
A round-up of select Canadian and U.S. socially responsible investment options


CANADIAN DIVIDEND AND                       Is a green fund right
                                            for you?
Ethical Canadian Dividend
Ethical Canadian Dividend ‐F
                                            There’s been an explosion in the number of socially
CANADIAN EQUITY                             responsible investment funds in Canada. Here’s how to
Desjardins Environment
GWL Ethics (G) DSC
                                            tell which ones are right for you.
GWL Ethics (G) NL
                                            Socially responsible investment         Environment Fund. The best thing
IA Clarington Inhance Cd EqSRI CI‐A
                                            funds emerged in the 1980s, took        about true environmental sector
IA Clarington Inhance Cd EqSRI CI-F
London Life Ethics (GWLIM)
                                            hold in the late 1990s, and surpassed   funds, says Strategic Sustainable
Meritas Jantzi Social Index                 the 200 mark worldwide in 2003.         Investments’ Nash, is that not
PH&N Community Values Cdn Equity            Today, in Canada, according to data     only do they “offer diversification
RBC Jantzi Canadian Equity                  compiled by the Social Investment       from environmental risks such
RBC Jantzi Canadian Equity-D                Organization, a Canadian non-profit     as CO2 emissions, water scarcity,
                                            whose member firms represent a big      and toxicity risks,” but that they
CANADIAN EQUITY BALANCED                    chunk of the SRI fund market, there     “invest in true corporate leaders
Acuity Social Values Balanced               are more than 90 different mutual       in the transition to a sustainable
Ethical Balanced                            and retail venture funds on offer       future, rather than investing in
Ethical Balanced‐F                          to everyday Canadian investors.         ‘best of the worst’ companies who
Ethical Select Cdn Growth PT                The first rule of thumb for this        are simply doing less damage.”
IA Clarington Inhance Growth SRI‐A          market: “Do your homework,” says
IA Clarington Inhance Growth SRI-F          Timothy Nash, president of Strategic
IA Clarington Inhance Mt Inc SRI‐A          Sustainable Investments. “Not all
IA Clarington Inhance Mt Inc SRI-F          green or SRI funds are equal.”
Meritas Monthly Dividend and Income            Investors looking for something
SocieTerra Growth Portfolio                 more focused may want to opt for
                                            products like environmental sector
CANADIAN FIXED INCOME                       funds, such as Scotiabank’s Climate
Meritas Canadian Bond                       Change Fund, Greenchip Global
NEI Canadian Bond                           Equity Fund and Acuity’s Clean
NEI Canadian Bond‐F
PH&N Community Values Bond-D

Ethical Select Conservative Portfolio   >

                                                                                                GREENLIVINGONLINE.COM 6
Socially Responsible Investing:
What’s out there

CANADIAN FIXED INCOME                     Mackenzie Univ Sustainable Opp CI          CANADIAN SOCIALLY RESPONSIBLE
BALANCED / CONT’D                         Meritas International Equity               EXCHANGE TRADED FUNDS
Ethical Select Conservative Portfolio-F   PH&N Community Values Glb Equ-D            iShares Jantzi Social Index (TSX)
IA Clarington Inhance Con SRI Pt‐A        RBC Jantzi Global Equity
SocieTerra Secure Market Portfolio        RBC Jantzi Global Equity-D                 SELECTED U.S. SOCIALLY
                                          Scotia Global Climate Change               RESPONSIBLE EXCHANGE TRADED
CANADIAN FOCUSED EQUITY                   Scotia Global Climate Change‐F             FUNDS**
Acuity Alpha Social Values Portfolio      TD Global Sustainability‐I
Acuity Social Values Canadian Equity                                                  RESPONSIBLE COMPANIES
Ethical Growth                            GLOBAL SMALL/MID CAP EQUITY                iShares KLD Select Social Index (NYSE)
Ethical Growth‐F                          BMO GDN Sustainable Climate Cls AD SR      iShares KLD 400 Social Index (NYSE)
Investors Summa SRI ClassTM A             BMO Sustainable Climate Class
Investors Summa SRI FundTM A              Investors Summa Glob Environ Leaders       ALTERNATIVE ENERGY
                                            Class A                                  PowerShares Wilderhill Clean Energy
CANADIAN FOCUSED SMALL/MID                                                              Portfolio (NYSE)
CAP EQUITY                                GLOBAL EQUITY BALANCED                     PowerShares Wilderhill Progressive Energy
Acuity Clean Environment Equity           Ethical Select Global Growth Portfolio        Portfolio (NYSE)
Matrix Sierra Equity                      Ethical Select Global Growth Portfolio-F   First Trust NASDAQ Clean Edge (Nasdaq)
                                          RBC Jantzi Balanced                        PowerShares Cleantech Portfolio (NYSE)
CANADIAN MONEY MARKET                     RBC Jantzi Balanced-D
Meritas Money Market                      SocieTerra Growth Plus Portfolio           GLOBAL ALTERNATIVE ENERGY
                                                                                     Van Eck Market Vectors Global Alternative
CANADIAN NEUTRAL BALANCED                 GLOBAL NEUTRAL BALANCED                      Energy (NYSE)
Ethical Select Cdn Balanced PT            Ethical Select Global Balanced Portfolio   PowerShares Clean Energy Portfolio (NYSE)
IA Clarington Inhance Bal SRI Pt‐T6       Ethical Select Global Balanced PT-F
Meritas Balanced                                                                     SOLAR ENERGY
PH&N Community Values Balanced-D          INTERNATIONAL EQUITY                       Claymore Global Solar Energy (NYSE)
SocieTerra Balanced Portfolio             Ethical International Equity               Van Eck Market Vectors Solar Energy
                                          Ethical International Equity‐F               (NYSE)
EQUITY                                    MISCELLANEOUS                              WIND ENERGY
Ethical Special Equity                    Creststreet Alternative Energy             First Trust Global Wind Energy Fund
Ethical Special Equity‐F                  Criterion Global Clean Energy CH‐F            (NYSE)
                                          Criterion Global Clean Energy‐P
GLOBAL EQUITY                                                                        *Source: Social Investment Organization
Acuity Social Values Global Equity        RETAIL VENTURE CAPITAL                        (
BMO Sustainable Opportunities Class       B.E.S.T. Total Return Fund Inc.            **Source:
Criterion Water Infrastructure‐A          Fondaction (QC)
Ethical Global Dividend‐A                 GrowthWorks Atlantic Venture Bal‐443
Ethical Global Dividend‐F                 GrowthWorks Canadian
Ethical Global Equity                     Quebec Solidarity Fund (QFL)
Ethical Global Equity‐F                   Working Opportunity Balanced Ser 1
Greenchip Global Equity Fund              Working Opportunity Balanced Ser 2
HSBC Global Climate Change‐A              Working Opportunity Growth Ser 1
HSBC Global Climate Change‐I              Working Opportunity Growth Ser 2
IA Clarington Inh Gl Eq SRI Cl‐A
IA Clarington Inh Gl Eq SRI Cl‐F          U.S. EQUITY
Investors Summa Global SRI‐A              Ethical American Multi‐Strategy
Investors Summa Global SRI Class A        Ethical American Multi‐Strategy‐F
                                          Meritas U.S. Equity

                                                                                                     GREENLIVINGONLINE.COM 7
Socially Responsible Investing:
Banking on green

Banking on green
How Canadian banks are promoting eco-action

                  Canada’s banking sector figures mightily in a future         “Canadian banks are trailblazers in establishing
                  green economy. Entrusted with hundreds of billions of     lending guidelines that consider environmental and
                  dollars, employing more than 200,000 Canadians, the       social risks,” says Oviedo. BMO was one of the first
                  sector has tremendous potential to impact the planet      banks to identify specific industries to be considered
                  for the better through internal green and socially re-    to be environmentally sensitive and rolled out lend-
                  sponsible practices. Banking services also have the       ing guidelines tailored to those specific 50 industries.
                  power to shape the environmental practices of the         “Those guidelines include considerations for property
                  many companies in which they invest.                      and operational audits, identification of environmen-
                     “To the extent that banks are asking questions         tal exposure, and evaluation of a borrower’s environ-
                  about environmental performance and working with          mental management practices,” she says. “BMO also
                  companies borrowing money to make sure they up-           identifies and evaluates environmental risks relating
                  hold environmentally responsible principles, they are     to climate change and forest biodiversity.”
                  making a big contribution to the health of the planet,”      Along with TD Bank Financial Group, BMO was
                  says Andrea Baldwin, a vice-president at Canadian         also one of the first banks in Canada to establish exclu-
                  Business for Social Responsibility, a non-profit busi-    sionary criteria for financing, she adds. More recently,
                  ness organization dedicated to CSR.                       RBC also rolled out its comprehensive environmental
                     Sheila Oviedo, associate sustainability analyst with   and social risk assessment scheme and also established
                  Jantzi-Sustainalytics (a global environmental, social     an exclusionary criteria for certain industries.
                  and governance research and analysis firm), adds that        TD Bank’s wholesale and business banking group
                  Canadian banks outperform their North American            also adopted environmental and social credit risk
                  peers in environmental, social and governance per-        management processes, which include company and
                  formance. “Canadian banks are also very competitive       sector-specific reviews for environmental and social
                  with one another with respect to their sustainability     issues (as well as climate change and regulatory risk).
                  practices.”                                               “TD states that it does not lend money for transactions
                     Banking services can play a leadership role for all    that would involve activities within World Heritage
                  business by taking a stance on strict environmental       sites or would result in degradation of protected en-
                  and social standards. “Banks play a significant role      dangered natural habitats (as classified by the World
                  in promoting green initiatives across all sectors, with   Conservation Union),” adds Oviedo.
                  standards for credit and loans as well as project fi-        In addition to setting and upholding strong credit
                  nance.” While it is true that banks continue to finance   and loan standards, Scotiabank is noted for promot-
                  projects and industries with negative environmental       ing and supporting the adoption of green business
                  impacts, here’s where they show real leadership on im-    practices internationally. One example of that is its
                  pacting the environment for the better.                   sponsorship of GreenPYME, a small business energy
                                                                            audit program with Inter-American Investment Corp.
                  Credit and loan standards                                 Using GreenPYME, more than 100 small- and medi-
                  Experts agree banks’ greatest green influence when it     um-sized enterprise customers in Jamaica have been
                  comes to credit and loan standards is in three areas:     involved in consultations to evaluate and improve the
                  setting internal standards for high environmental         energy efficiencies of their businesses, for example.
                  and social risk industries; ensuring borrowers uphold     “Scotiabank’s very focused on promoting environ-
                  banking environmental and social standards; and           mental best practices globally,” adds Baldwin.
                  avoiding investments in controversial industries.

                                                                                                      GREENLIVINGONLINE.COM 8
Socially Responsible Investing:
Banking on green

                  Business operations                                           is encouraged through training workshops for clean-
                  Most Canadian banks have taken steps to reduce their          ing and maintenance workers, as well as bank leaders
                  environmental footprint, according to Kernaghan               who promote the program among peers.
                  Webb, founding director, Institute for the Study of
                  Corporate Social Responsibility at Ryerson University.        Sustainable products
                  For instance, ING’s worldwide operations have been            and services
                  carbon neutral (a balance between carbon emissions            Banks are developing creative and useful products and
                  and those offset) since 2007. While TD Bank is vocal          services that respond to consumer demand for sus-
                  about reaching its target of becoming carbon neutral          tainable choices, from paperless statements to credit
                  in 2010, including retrofitting lighting and optimizing       cards co-branded with environmental charities when
                  the heating and cooling systems in its buildings, BMO         they want to support a particular cause. To promote
                  is also a leader in reaching carbon neutrality. “It is just   the use of hybrid vehicles, for example, TD Bank cre-
                  a lot quieter about it,” adds Baldwin. BMO taps Bull-         ated an innovative Green Wheel Auto Insurance Dis-
                  frog Power’s clean, emission-free electricity to power        count, which offers savings of up to 10 percent off the
                  many of its branches in Nova Scotia, New Brunswick,           total premium of car insurance with a TD-owned in-
                  and Prince Edward Island in addition to Ontario, Al-          surance company for hybrid owners.
                  berta, and British Columbia.                                     Vancity, a leading green credit union based in Van-
                     Relative to its peers, Royal Bank of Canada (RBC)’s        couver noted for transparency, disclosure and corpo-
                  environmental management system (EMS) is consid-              rate governance, has tailored a plethora of innovative
                  ered quite strong, detailed and comprehensive, ac-            products and services that promote the environment
                  cording to experts. The EMS applies to all RBC prem-          such as enviro Visa (at least five percent of annual
                  ises, with particular emphasis on real estate opera-          profits go to local environmental projects), the Eco
                  tions within Canada, and covers energy management,            Efficiency loan, tailored to help non-profits and busi-
                  ozone depleting substances, environmental site as-            nesses invest in energy-saving upgrades to facilities,
                  sessments, purchasing and contractors, pest manage-           and microloans for green businesses at a preferred rate
  Banks are       ment, water conversation, use of cleaning products,           of prime +3 per cent.
  developing      hazardous materials handling and recycling.                      Banks are also supporting the environment with
  creative           RBC also understands the importance of executive           sustainability funds that focus on investment in
  and useful      level accountability to environmental and social is-          “green” companies. Scotiabank promotes investment
  products and    sues. The company has a number of positions, includ-          in climate change, in particular, through its Scotia
  services that   ing a director of corporate environmental affairs, a se-      Global Climate Change Fund, a fund that invests pri-
  respond to      nior manager of environmental initiatives and a senior        marily in a diversified portfolio of equity securities of
  consumer        manager of environmental risk management who all              companies located around the world that are expected
  demand for      report to the vice-president of corporate citizenship         to profit from actions taken by companies to mitigate
  sustainable     and to RBC’s global risk management group. The cor-           the impact of climate change on the environment.
  choices.        porate environmental affairs group, which oversees            Promoting green “investment” closer to home, Scotia-
                  RBC’s lauded Environmental Management Systems,                bank also offers a special line of credit that can help
                  reports to the chief operating officer and periodically       homeowners invest in energy-efficiency upgrades for
                  to RBC’s group executive and board of directors, adds         their homes (Scotiabank’s Scotia Total Equity Plan).
                  Oviedo. (RBC’s leadership in environmental, social               When it comes to financing alternative sources
                  and governance risk put it on Businessweek’s Global           of energy, “Canadian Imperial Bank of Commerce
                  100 in 2010.)                                                 stands out for aggregate amount,” says Oviedo. “It has
                     In another example of Scotiabank’s international           financed renewable energy projects having raised or
                  environmental stewardship, its Peru offices developed         extended over C$3 billion in capital for renewable en-
                  Grupo Scotiabank Ecoeficiente, an internal recycling          ergy developers since 2002.” CIBC also organizes an
                  program for paper, glass, plastic, cans, and organic          annual Clean Energy Investor Conference involving
                  waste at its Lima headquarters. Through the program,          companies from clean energy sectors to promote the
                  Scotiabank Peru formed an alliance with non-profit            sustainable practice.
                  Ciudad Saludable and its network of independent                  When it comes to clean energy project financ-
                  street labourers, who collect and sell recyclable ma-         ing (excluding loans and lines of credit), from 2004
                  terials thus ensuring a stable income for the recyclers       to 2010, the top three banks in Canada are Manulife
                  and their families. Scotiabank Peru staff participation       Financial Corp. (US$1.8 billion); Bank of Nova Scotia

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Socially Responsible Investing:
Banking on green

                      (US$917 million); and CIBC (US$680 million), accord-        Community activity
                      ing to preliminary results from Bloomberg New En-           & consumer awareness
                      ergy Finance research. Maggie Kuang at the Singapore        The list of social and environmental community and
                      Bloomberg New Energy Finance office, adds that given        national initiatives banks support through donations
                      the significant investment by Manulife alone, “which is     and sponsorships is long. One that stands out in Bald-
                      half the value of total deals it participated in the past   win’s opinion: RBC’s Blue Water Project, an innovative,
                      six years,” clean energy is becoming a more attractive      wide-ranging, 10-year global commitment to help pro-
                      investment opportunity in Canada.                           tect the world’s fresh water. It includes a $50-million
                         “By investing in clean energy, we can fight air and      philanthropic commitment to supporting organiza-
                      water pollution and global climate changes, establish       tions that protect watersheds and ensure access to clean
                      energy security for countries, develop more sustainable     drinking water. Since 2007, RBC has committed over
                      economies and create green jobs,” adds Kuang.               $27 million to more than 350 organizations worldwide
                         In addition to retail products and corporate lending,    working in this area.
                      Canadian banks are leaders in the area of Environmen-          RBC doesn’t stop there. It’s intending to help educate
                      tal Markets, specifically carbon markets, the process of    Canadians on climate change through its sponsorship
                      monetizing the price of carbon to give economic incen-      of the Climate Prosperity Initiative — a collaboration
                      tive for achieving a reduction on the emission of pollut-   between the National Round Table on the Environment
                      ants. Both Scotiabank and RBC offer certified emission      and the Economy (NRTEE) and Royal Canadian Geo-
                      reduction (CER) credits. “Anyone has the right to origi-    graphical Society (RCGS) announced in the fall of 2010.
                      nate carbon credits through investing in a Clean Devel-        The foundation of Scotiabank’s green education and
                      opment Mechanism project, which generates CERs you          community activities is its EcoLiving program, includ-
                      can sell,” adds Georgina Edwards, a senior analyst with     ing its web site,, EcoLiving
                      Bloomberg New Energy Finance. As banks increasingly         Awards and EcoLiving magazine. The overarching aim
                      act as intermediaries in the transaction process, they      of the platform is to encourage Canadian homeowners
                      will add liquidity to the market or encourage its devel-    to take on green renovations. Another prong of the plat-
                      opment, says Edwards.                                       form is Scotiabank’s sponsorship of Environmental De-
                                                                                  fence’s I AM Green Power campaign, which empowers
                                                                                  Canadians to find local climate-change solutions, while
                                                                                  featuring stories from Canadians as they make environ-
   What are the Equator Principles (EPs)?                                         mental differences as part of their everyday lives.
   Several Canadian banks have signed on to respect a voluntary                      Scotiabank’s efforts have struck a chord with em-
   international set of 10 principles for determining, assessing                  ployees. In 2010 it was named to Maclean’s List of The
   and managing social and environmental risk in project                          Green 30, a roster of companies that get top marks
   financing (with total capital costs of $US10 million or more).                 from employees for their environmental efforts. Staff
                                                                                  gave kudos in particular for the Scotia Global Climate
   The first principle that Equator Principles Financial Institutions
                                                                                  Change Fund; the launch of a paper reduction policy
   (EPFIs) commit to is reviewing and categorizing projects
                                                                                  that helped switch 6,800 accounts to paperless record-
   based on their potential for environmental impact (using
                                                                                  keeping, and led to 5,056 tonnes of paper being recycled
   screening criteria from the International Finance Corporation
                                                                                  from branches and offices; and a ScotiaGreen intranet
   performance standards on social and environmental
                                                                                  site and information lunches to educate employees
   sustainability). The second principle is to conduct an
                                                                                  about climate change.
   assessment of environment risks that includes practical
                                                                                     Last but far from least is the TD Friends of the Envi-
   risk mitigation and management measures. The remaining
                                                                                  ronment Foundation, which has provided $53 million
   principles include standards around consultation and
                                                                                  in support to more than 19,000 grassroots environmen-
   disclosure as well as a grievance mechanism, among others.
                                                                                  tal projects over the past 20 years.
   EPFIs also commit to not providing loans where the                                Environmental sustainability runs deep in Cana-
   borrower doesn’t comply with its own EP-based policies and                     dian banks’ social responsibility activities. Aggressive
   procedures.                                                                    corporate green initiatives, well-articulated social and
   The principles are intended to serve as a common baseline                      environmental standards for lending and investment,
   and framework for each institution’s own internal social and                   and a strong commitment to supporting, educating and

   environmental policies, procedures and standards related to                    promoting green by the banking sector bodes well for a
   its project financing activities.                                              future green economy and a green planet.

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Socially Responsible Investing:
Glossary of Terms

Glossary of terms
If you’re thinking of making your dollar greener, you’ll need a handle on the financial lingo you’re
bound to encounter. We consulted with Andrew Heintzman, president and CEO of Investeco,
Canada’s first environmental investment company, in preparing the following glossary.

The ESG Principles: A set of principles            in the area of human rights, workers’          sess these consequences, paired with me-
devised by the international investment            rights, environment, socially responsible      thodical financial analysis. The MBI process
community that reflect the view that en-           corporate governance, and more.                can also strengthen a company’s fiduciary
vironmental, social and corporate govern-        • Community Investment: Investment               responsibility by aligning the mission with
ance (ESG) issues can affect the perform-          of money into community development            asset management.
ance of investment portfolios. ESG prin-           or micro-enterprise initiatives that
ciples better align investors with the broader     contribute to the growth and well-             Social venture capital: A form of venture
objectives of society.                             being of particular communities. These         capital investing that injects capital into so-
   Among the principles there is a commit-         projects may include providing loans           cially and environmentally responsible busi-
ment to incorporate ESG issues into invest-        to low-income entrepreneurs, high risk         nesses. These investments provide market-
ment analysis and decision making through          loans or equity in not-for-profit projects,    based solutions to social and environmental
actions such as developing and using avail-        and so on.                                     issues and attractive returns to investors.
able tools and metrics, and encouraging in-      • Integrating Social and Sustainability
vestment service providers to do the same.         Factors With Stock Portfolio Analysis:         Responsible Property Investment
There is also a commitment to be “active           Increasingly asset manager are including       (RPI): An approach to property investing
owners and incorporate ESG issues into our         social and sustainability analysis (rather     that recognizes environmental and social
ownership policies and practices” through          than simply negative screening) to             considerations along with more conven-
exercising voting rights and participating in      improve investment decisions.                  tional financial objectives. It goes beyond
the development of standards, for example.                                                        minimum legal requirements, to improving
   The ESG Principles aim to provide a vol-      Impact Investing: An investment strat-           the environmental or social performance of
untary framework by which all investors can      egy that proactively seeks to place capital in   property, through strategies such as urban
incorporate ESG issues into their decision-      businesses that generate financial returns       revitalization, or the conservation of natural
making and ownership practices and so            as well as an intentional social or environ-     resources.
better align their objectives with those of      mental goal.
society at large. Learn more about them at                                                        CRCE (Canadian Renewable and                                       “Triple bottom line” or TBL (“people,            Conservation Expenses): A category of
                                                 planet, profit”): A term that captures all       expenditures (introduced in 1996) that allow
SRI (Social Responsible Investing):              of the values and criteria that typically go     investors to fully write-off some of the intan-
When ESG factors are integrated into the         into what make organizations and society         gible costs of investing in renewable-energy
selection and management of investments.         successful including economic, ecological        and energy-conservation projects. The gov-

Within SRI, there are several components         and social.                                      ernment’s goal is to get more Canadians to
including:                                                                                        invest in energy-efficient projects.
• Negative Screening: Avoidance of               Mission-based investing: Incorporat-
   investing in companies doing business         ing an institution’s mission into its invest-
   in industries that are detrimental to         ment decisions; guiding what, if any, non-
   society, such as tobacco, alcohol, military   financial (e.g., green) objectives it may set
   or weapons, gambling, pornography,            for its portfolio, among other choices.
   nuclear power, and more.                         MBI necessitates understanding that all
• Positive Screening: Investing in               investments have environmental and social
   companies that have superior practices        consequences. MBI is a process used to as-

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