Strategies Exclusion (negative screening)

Many funds in Canada intentionally exclude from their portfolios companies with significant involvement in nuclear power production, the manufacture of tobacco products and weapons contracting. The Jantzi Social Index (JSI) indeed excludes companies for these very reasons. Following are examples of companies listed on the Toronto Stock Exchange (TSX) but not included in the JSI for the reasons stated.*

*Exclusionary screen details vary from one institution to another, so, for example, even if two fund companies state that they exclude companies on military involvement, they may not necessarily exclude the same companies from their portfolio. (Ethiquette will soon have a section detailing the exclusionary screens for the RI funds available in Canada).


CGI Group Inc.

CGI and subsidiaries provide information technology (IT) and business process services. The company is an average ESG performer relative to industry peers and is not implicated in any significant events which pose risks to investors. However, CGI provides business consulting, systems integration and IT outsourcing to both the commercial and defence industries. The company has multiple contracts with US defence and intelligence clients, including several renewed in FY 2012 with the US Defence Information Technology Contracting Organization and the Space and Naval Warfare Systems Centre. It is estimated that between 5% and 9.9% of CGI revenue derives from the servicing of military activities. (Source: Sustainalytics, 2014)


Cameco Corporation

Cameco Corporation operates as a uranium producer, conversion services supplier and fuel manufacturer. Despite strong overall ESG performance, Cameco Corp. has been implicated in incidents which impact the environment and reflect key areas of potential risk for investors. Cameco operations also include controversial product involvement sectors. The company holds a 31.6% stake in Bruce Power, the licensed operator of the Bruce Nuclear Generating Station in Ontario. Additionally, it is estimated that 50% or greater of company revenue derives from support for the nuclear power industry. Cameco is one of the world’s largest low cost uranium producers, accounting for 14% of the world’s uranium supply in 2012. (Source: Sustainalytics, 2014)


Enbridge Inc.

Enbridge Inc. operates as an energy transport and distribution company in Canada and the United States. Based on overall ESG performance relative to industry peers, the company is considered an average performer. Enbridge has, however, been implicated in significant environmental and community relations incidents which reflect key areas of potential risk for investors. The company has experienced a number of substantial pipeline spills. Most notably, in July 2010, the company caused the largest onshore oil spill in US history when line 6B ruptured, spilling more than 20 000 barrels of diluted bitumen, a substantial quantity of which found its way into local waterways. Regulators found the company at fault, citing ‘pervasive organizational failures’. (Source: Sustainalytics, 2014)


SNC Lavalin Group Inc.

SNC-Lavalin Group Inc. operates worldwide in engineering and construction. To compound poor overall ESG performance, SNC Lavalin has been implicated in significant business ethics and community relations incidents. The company has experienced recurring allegations of corruption and fraud in multiple jurisdictions involving employees at the highest levels. Unlike other companies involved in controversies of the like, SNC Lavalin has consistently displayed a unique pattern of structural deficiencies, inadequate management systems and high exposure to bribery-related risks. (Source: Sustainalytics, 2014)


Barrick Gold Corporation

Barrick Gold Corporation engages in the production and sale of gold and copper. Despite strong ESG management systems and related disclosure mechanisms, the company has been implicated in significant environmental and community relations incidents which reflect key areas of potential risk for investors. These controversies have had regulatory, reputational and operational impact on the company and have led to shareholder lawsuits. Barrick’s 95%-owned Porgera mine in Papua New Guinea has been linked to serious adverse environmental impact. Indeed, at this particular site, the company applies waste management practices which fall short of best practice standards and which would qualify as illegal in most developed countries. (Source: Sustainalytics, 2014).


Strengths and weaknesses


  • When one avoids benefiting from practices which one considers offensive, one helps maintain both consistency and a sense of purpose.
  • When a sufficient number of investors (primarily institutional investors such as pension funds) exclude a company or bar a certain type of corporate behaviour and make it known why, they can impact a company’s access to capital and bring pressure to bear on company officials to improve operating practices.


  • Individual avoidance desires are not addressed by existing mutual funds.
  • Custom exclusion can only be obtained when one has sufficient funds to provide for individual portfolio diversity.
  • Given the passive nature of this strategy, impact on corporate or societal change is indirect.