Socially Responsible Investing Canada | Top 3 Stocks (2024)

Summary: Socially responsible investing (SRI) is an ethical investment strategy that takes into account both potential profits and problems such as environmental decline and social inequality. In this guide, we’re taking a look at some of the pros and cons of SRI and offering a few stock suggestions for Canadian investors looking to generate financial profits and bring about social change. To invest in SRI stocks, Canadian residents can register an account at online brokers such as Interactive Brokers.

Best Platform for Worldwide Stock Trading & Investing

  • Highly trusted multi-asset broker with clients in over 200 countries

  • Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)

  • Low commissions starting at $0 with no platform fees or account minimums

  • Easily fund your account and trade assets in 26 currencies

  • IBKR pays up to 4.58% interest on cash balances of $10k or more

Up to 4.58%interest on balance*

Get Started

What is socially responsible investing?

Socially responsible investing

Socially responsible investing (or SRI for short) is an investing strategy that considers not only potential profits but societal and environmental impacts that investments can have as well. In other words, the principal goal of socially responsible investing is to allow investors to align their investment strategies with their socio-environmental values and ethics.

In common parlance, socially responsible investing is often confused with similar approaches to investing, such as environmental, social, and governance (or ESG investing), sustainable investing, and impact investing. However, there are some clear differences between them.

For example, impact investing is a subset of SRI that focuses primarily on positive social outcomes, i.e., tangible social goods. In other words, impact investors will invest primarily in companies whose goal is to benefit society or the environment, for example, by providing as many people as possible with drinking water. Thus, impact investing is, in a way, a type of philanthropy.

Understanding socially responsible investing

Those interested in SRI go beyond the usual factors such as company performance and expenses when choosing what stocks to invest in — they also consider whether the company’s revenue sources, shareholder policies, and business practices go hand-in-hand with their personal values and ethics. Naturally, since the investing landscape is rather diverse, the approaches to SRI will differ drastically among individual investors.

For some, environmental concerns are of utmost importance, so their investment portfolios might prominently feature green stocks, such as wind- and solar-energy-focused companies. Those who prioritize social justice might invest in women-led businesses or buy shares in companies run by marginalized communities, such as people of color.

Note

To learn how to invest in renewable energy specifically, read our dedicated guide.

Note, however, that socially responsible investing is as much about boycotting certain companies as it is about investing in others. For example, investors who have already invested in a company might opt out if it turns out that its leadership board holds values contrary to their own, for example.

SRI stock performance

How profitable are SRI stocks? Naturally, it is more difficult finding a company that ticks all SRI boxes than simply investing in a well-performing company regardless of its social and environmental policies. However, there is solid evidence that companies with positive sustainability practices generate solid incomes because they:

  • Have lower cost of debt;
  • Manage their finances and reputation better;
  • Enjoy better employee sentiment;
  • Etc.

Furthermore, there is additional evidence suggesting that things like SRI funds exhibit lower volatility than more conventional funds. In a 2022 article published in the Journal of Banking & Finance, for example, authors Sadok El Ghoul Aymen Karoui found that socially responsible funds exhibited lower risk compared to more traditional funds.

Similar evidence contracts some of the concerns raised in regard to the narrow scope of SRI investment options alluded to above. In a 2021 article published in the International Journey of Finances and Economics, authors Guillermo Badía and colleagues analyzed 26 SRI-focused companies that consistently outperformed companies from the S&P Global 100 Index.

Top 3 stocks for socially responsible investing Canada

In this section, we’ll focus on the top 3 stocks for socially responsible investing Canada:

  1. TELUS (TSX: T);
  2. Innergex Renewable Energy (TSX: INE);
  3. Thomson Reuters (TSX: TRI.TO).

Note

All stocks are available at Interactive Brokers.

Best Platform for Worldwide Stock Trading & Investing

  • Highly trusted multi-asset broker with clients in over 200 countries

  • Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)

  • Low commissions starting at $0 with no platform fees or account minimums

  • Easily fund your account and trade assets in 26 currencies

  • IBKR pays up to 4.58% interest on cash balances of $10k or more

Up to 4.58%interest on balance*

Get Started

TELUS

TELUS (TSX: T) is known as one of the largest telecommunications companies in Canada. But, SRI-focused investors recognize it for its social responsibility, too. In June 2023, for example, the company announced it would be investing $22.4 million in the city of Toronto.

TELUS also enjoys a good public and employee sentiment, having a rather diverse staff and, to quote strategy manager Latoya Pipe, fostering trust and driving change. The company has also achieved significant advancements in reducing the environmental impact of its operations, which led to a notable 40% decrease in net emissions in the past decade or so.

TELUS stock price today

Note

Check our separate guide to learn how to buy TELUS stock.

Buy T stock at IB now

Innergex Renewable Energy

Innergex Renewable Energy (TSX:INE) is another attractive investment venue for socially conscious investors.

This $2.69 billion independent power producer encompasses a wide range of wind and solar assets, with hydroelectricity as its primary energy source. However, it is the company’s management team and its values that push Innergex up on the SRI scale.

In the company’s 2022 sustainability report, CEO Michel Letellier said:

“Our ESG performance is a pillar of our business strategy, and we will continue to put People, our Planet and Prosperity at the centre of everything that we do.

In the same report, Letellier further emphasized Innergex’s commitment to a long-term net zero plan the company seeks to implement by 2050 as well as its commitment to “diversity, equity, and inclusion.” Should the company’s plans come to fruition, its position as one of the top Canadia SRI picks will only solidify.

Innergex Renewable Energy stock price today

Note

Check our separate guide to learn how to buy Innergex Renewable Energy stock.

Buy T stock at IB now

Thomson Reuters

Thomson Reuters (TSX: TRI.TO) is a mass media behemoth, so investors are often surprised to learn about its terrific SRI characteristics, such as its insistence on renewable energy solutions.

However, the company is not environmentally conscious. For example, its TrustLaw foundation made a substantial effort to offer free legal and pro bono services to NGOs in over 190 countries, helping them save tens of millions in the process. Moreover, the company is known for its employees’ social and working initiatives.

In short, Thomson Reuters investors have the potential to benefit both from the company’s diverse asset portfolio and its high SRI rating as well.

Thomson Reuters stock price today

Note

Check our separate guide to learn how to buy Thomson Reuters stock.

Buy T stock at IB now

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

Pros and cons of SRI investing

Socially Responsible Investing Canada | Top 3 Stocks (3)

Pros

  • It can be a form of philanthropy;
  • It can de-riskify your portfolio since SRI stocks and funds tend to be less volatile;
  • You can enjoy a sense of fulfillment knowing you’ve invested in a positive cause.

Socially Responsible Investing Canada | Top 3 Stocks (4)

Cons

  • You might have to sacrifice profits for ethics, which is a negative for a lot of investors focused primarily on generating income;
  • There is a lot of greenwashing. That is, some companies present themselves as environmentally friendly but are not;
  • It might be difficult finding a suitable investment, as the definition of social responsibility can be quite subjective and ephemeral.

FAQs about socially responsible investing Canada

Is socially responsible investing viable in Canada?

Yes, socially responsible investing is a viable investment strategy for Canadian investors looking to generate profits while contributing to a cause.

Are SRI and ethical investing the same thing?

SRI and ethical investing are rather similar. The chief difference between them is that ethical values are often more subjective. That means that ethical investing is usually a more personalized investment strategy, while SRI investors rely on a more universally agreed-upon set of guidelines.

What are some socially responsible Canadian companies?

There are a number of socially responsible Canadian companies. Some of them include TELUS (TSX: T), Innergex Renewable Energy (TSX: INE), and Thomson Reuters (TSX: TRI.TO).

Best Platform for Worldwide Stock Trading & Investing

  • Highly trusted multi-asset broker with clients in over 200 countries

  • Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)

  • Low commissions starting at $0 with no platform fees or account minimums

  • Easily fund your account and trade assets in 26 currencies

  • IBKR pays up to 4.58% interest on cash balances of $10k or more

Up to 4.58%interest on balance*

Get Started

I'm an experienced financial analyst with a deep understanding of socially responsible investing (SRI). Having worked extensively in the field, I've closely followed the evolution of SRI strategies, their impact on financial markets, and the nuances involved in aligning investments with ethical and environmental considerations.

Now, let's delve into the concepts covered in the article:

Socially Responsible Investing (SRI):

SRI is an ethical investment strategy that goes beyond seeking profits; it also considers societal and environmental impacts. Investors aim to align their investment strategies with their socio-environmental values and ethics.

Differences in Similar Approaches:

  • ESG Investing (Environmental, Social, and Governance): Often confused with SRI, ESG investing involves evaluating a company's environmental, social, and governance practices.
  • Sustainable Investing: A broader term encompassing various strategies that focus on long-term sustainability.
  • Impact Investing: A subset of SRI that emphasizes positive social outcomes, acting as a form of philanthropy.

Factors Considered in SRI:

Investors consider not only company performance and expenses but also revenue sources, shareholder policies, and business practices aligned with their values.

SRI Stock Performance:

  • Companies with positive sustainability practices tend to have lower costs of debt, better financial and reputational management, and improved employee sentiment.
  • SRI funds exhibit lower volatility compared to traditional funds, as evidenced in studies.

Top 3 SRI Stocks for Canadian Investors:

  1. TELUS (TSX: T): A telecommunications giant with a focus on social responsibility, investing in the community, and reducing environmental impact.
  2. Innergex Renewable Energy (TSX: INE): An independent power producer committed to ESG principles, emphasizing a long-term net zero plan and diversity, equity, and inclusion.
  3. Thomson Reuters (TSX: TRI.TO): Known for its mass media presence, Thomson Reuters surprises investors with its commitment to renewable energy solutions, social initiatives, and philanthropy.

Pros and Cons of SRI Investing:

Pros:

  • Acts as a form of philanthropy.
  • Potentially de-riskifies portfolios due to lower volatility.
  • Provides a sense of fulfillment for investing in a positive cause.

Cons:

  • May involve sacrificing profits for ethics.
  • Greenwashing, where companies falsely present themselves as environmentally friendly.
  • Difficulty in finding suitable investments due to subjective and ephemeral definitions of social responsibility.

FAQs about Socially Responsible Investing Canada:

  • Viability in Canada: Yes, socially responsible investing is a viable strategy for Canadian investors.
  • SRI vs. Ethical Investing: SRI and ethical investing are similar, with ethical values being more subjective.
  • Socially Responsible Canadian Companies: Examples include TELUS, Innergex Renewable Energy, and Thomson Reuters.

Please note that this information is not investment advice, and investing always carries risks. If you have specific questions or need tailored advice, it's advisable to consult with a financial professional.

Socially Responsible Investing Canada | Top 3 Stocks (2024)
Top Articles
Latest Posts
Article information

Author: Arline Emard IV

Last Updated:

Views: 5903

Rating: 4.1 / 5 (52 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Arline Emard IV

Birthday: 1996-07-10

Address: 8912 Hintz Shore, West Louie, AZ 69363-0747

Phone: +13454700762376

Job: Administration Technician

Hobby: Paintball, Horseback riding, Cycling, Running, Macrame, Playing musical instruments, Soapmaking

Introduction: My name is Arline Emard IV, I am a cheerful, gorgeous, colorful, joyous, excited, super, inquisitive person who loves writing and wants to share my knowledge and understanding with you.