Greening Your RRSP/TFSA

Greening Your RRSP/TFSA

Canadians looking to diversify their portfolio by investing in the growing green economy have lots of good options.

Mutual Funds

Although mutual funds come with the highest fees, they are a great option for new investors wanting to keep it simple.

The AGF Global Sustainable Growth Equity Fund is the oldest option, having been launched in 1991. It focuses on four environmental themes that are poised to grow: environmental health & safety; water solutions; energy technologies; and pollution control. I had to comb through their annual report to find a list of holdings (most recently listed on March 15, 2015), and am mostly pleased with the companies inside. It does a good job of capturing a wide variety of opportunities across green themes. If you go this route, try to purchase the F-Series of the fund (fundcode AGF6250) to pay the lower 2.23% annual MER instead of the regular 3.19%.

I’m also happy for the launch of the newly-created NEI Environmental Leaders Fund. They haven’t released much info yet, but I’m happy for it to be building a track record. (Ethiquette   will soon be publishing their interview with NEI on the details of this new fund).

 

Exchange-Traded Funds (ETFs)

Green ETFs are a great low-cost investment to capitalize on specific opportunities in the growing green economy.
The PowerShares Cleantech Portfolio (PZD) covers a broad range of clean technology sectors, including energy, water, and transportation (image below). It is globally diversified, capturing green opportunities around the world. It includes lots of great companies like Schneider Electric (sells energy management hardware & software), and Vestas (the world’s largest wind turbine manufacturer). This ETF provides investors with broad exposure to green sectors. It has a 0.72% annual MER.

Nash graph

 

The iShares Global Water Index ETF (CWW) includes companies that will benefit as cities and countries keep building out water infrastructure. It’s a combination of industrials – boring stuff like pipes, pumps, filters, etc.- and utilities – companies that make money selling water out of the pipe and collecting wastewater. There are no bottled water companies or huge hydroelectric projects, but it does contain companies with a history of water privatization and others who are at the intersection of water & chemicals (like pesticides) to grow food. It’s not squeaky green, but this sector has been of the best performing of my portfolio over the last 5 years. It has a 0.67% annual MER.

 

Another green option is Market Vectors Environmental Services Fund (EVX). This fund holds companies that make money cleaning up pollution left by industry. It’s an interesting sector because some people don’t feel comfortable investing in companies that would suffer if there was no more pollution. However, lots of people feel that waste is inevitable in the medium-term so we might as well make money while we clean up and remediate our land, air, and water. It has a 0.92% annual MER.

 

Finally, for investors okay with a little more risk there’s the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN). It’s what I call ‘the sexy one’ and includes innovative companies like Telsa and SolarCity. Because it’s made up of smaller, high-growth companies, it tends to be the most volatile of the green ETFs. It has a 0.64% annual MER.

 

Conclusion

As the global economy starts to value the environment around us, investors are smart to diversify their portfolios into green sectors. There are plenty of great options available, it’s just about choosing which one is right for you.

 

**Disclaimer – the author owns shares of CWW, PZD, EVX, and QCLN in his portfolio**

 

This post was written by Timothy Nash.

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Timothy Nash, The Sustainable Economist, is an independent financial planner that helps ordinary people invest their own money online in sustainable investments. He is treasurer of the Ontario Nonprofit Network and the lead researcher for Ethical Market’s Green Transition Scoreboard®, which details more than $6.22 trillion of private investments in the global green economy.

 


Comments

  1. D. Croteau Says: February 3, 2016 at 12:51 pm

    I would recommend going towards ETFs for anyone interested in cleantech, renewable energies and more responsible investments. Also, as opposed to Mutual Funds, Canadian investors can choose US ETFs.

    Canada is severely lacking in truly responsible Mutual Funds maybe due to our heavily fossil-fuel centric market). While unavailable to Canadians, American mutual funds includes a lot of sustainability-themed mutual funds with positive screenings.

    Also, I am wondering why I can’t seem to find the FULL portfolio of the AGF Global Sustainable Growth Equity Fund. The Fund description indicates that there are about 55 holdings in it while I can’t seem to find more than a list of its top-20.

    One primordial aspect of responsible investing is transparency and it seems to me that ETFs are much more transparent in their holdings than Mutual Funds.

    As opposed to traditional investing, responsible investing is about choosing in what we invest and not solely on the expected ROI.

    • I also despise the lack of transparency in the mutual fund industry! I’ve found a little trick though. You can find the entire list of holdings in the mutual fund company’s annual (and sometimes semi-annual) report. So for the AGF Sustainable Growth Equity Fund, google “AGF mutual fund annual report”. Check out their 2015 semi-annual report and on page 195 you’ll find a complete list of holdings.

      I feel a little bit like Indiana Jones when I do this…

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