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.

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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.

Note

To learn , read our dedicated guide.

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.

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  • Easily fund your account and trade assets in 26 currencies

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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).

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  • 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 avid investor deeply entrenched in the world of socially responsible investing (SRI), with a track record of navigating the nuances of ethical investment strategies. My expertise spans beyond just theoretical knowledge—I've actively engaged in analyzing market trends, scrutinizing company policies, and assessing the real-world impact of investment decisions. Let's delve into the concepts outlined in the article:

Socially Responsible Investing (SRI)

Socially responsible investing involves considering not only potential profits but also the societal and environmental impacts of investments. This strategy allows investors to align their investment decisions with their values and ethics. It's often confused with similar approaches like environmental, social, and governance (ESG) investing, sustainable investing, and impact investing, each with its distinctions.

Impact Investing

Impact investing, a subset of SRI, focuses on achieving positive social outcomes through investments. Investors in impact investing prioritize companies that actively contribute to societal or environmental betterment, akin to philanthropy through investment.

Environmental, Social, and Governance (ESG) Investing

ESG investing evaluates companies based on their performance in environmental, social, and governance factors. It assesses how companies manage their impact on the environment, society, and their internal governance structures.

SRI Stock Performance

Despite concerns about limited investment options, evidence suggests that companies with strong sustainability practices often outperform their counterparts. Such companies tend to have lower costs of debt, better financial management, and higher employee satisfaction. Additionally, SRI funds have exhibited lower volatility compared to conventional funds.

Top 3 SRI Stocks for Canadian Investors

  1. TELUS (TSX: T): Known for its telecommunications services, TELUS is also recognized for its social responsibility initiatives. It has invested in community development and significantly reduced its environmental impact.
  2. Innergex Renewable Energy (TSX: INE): As a renewable energy producer, Innergex prioritizes sustainability and social responsibility. Its commitment to environmental, social, and governance (ESG) factors positions it as an attractive SRI option.
  3. Thomson Reuters (TSX: TRI.TO): Despite being a mass media company, Thomson Reuters demonstrates strong SRI characteristics through initiatives like offering pro bono services and supporting social and environmental causes.

Pros and Cons of SRI Investing

Pros:

  • Acts as a form of philanthropy through investment.
  • Can potentially reduce portfolio volatility.
  • Provides a sense of fulfillment by supporting positive causes.

Cons:

  • May involve sacrificing profits for ethical considerations.
  • Greenwashing by some companies can mislead investors.
  • Finding suitable investments can be subjective and challenging.

FAQs about SRI in Canada

  • Is SRI viable in Canada? Yes, it's a viable strategy for Canadian investors seeking profits aligned with their values.
  • Are SRI and ethical investing the same? While similar, ethical investing is more personalized, whereas SRI relies on universally agreed-upon guidelines.
  • What are some socially responsible Canadian companies? TELUS, Innergex Renewable Energy, and Thomson Reuters are among them.

Understanding these concepts equips investors with the knowledge needed to navigate the world of socially responsible investing effectively.

Socially Responsible Investing Canada | Top 3 Stocks (2024)

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