CBC Radio interviews personal finance expert Bruce Sellery about Green Bonds and how Canadians can make investments that align with their values. Listen to the interview on SoundCloud or read the transcript below.
Anchor: One of the terms we often hear is socially responsible investing, so what does that mean?
Bruce: Yes, so this is when you invest in a way that fits with your values. So instead of just investing solely to make yourself more money, you invest in a way that brings your values to light. We've talked in this column before about investing through a gender diversity product, or investing in Trump. Well, as it relates to the environment, you can do this passively or actively. The passive option is just to avoid sectors you don't want to support, like fossil-fuels. Or you can do it actively, where you invest to make an impact. It's called impact investing. Say, you really want solar to catch on, you lend money to a solar energy company to help them with your products.
Anchor: Alright so, let's start with Green Bonds - what's that?
Bruce: A bond is when you loan your money for a fixed return. Like an old Canadian saving bond - Remember those back in our youth? Green Bonds are bonds that lend money to finance environmental initiatives such as the expansion of public transit, or building a geothermal heating and cooling system for example. The big name in Canada is CoPower, and they offer Green Bonds to retail investors in many parts of Canada; Yukon, Ontario, BC, Alberta, etc. Their next round is coming out soon, the minimum investment is $5,000 and the rate they are offering is 5% which is pretty good when you look at what bond funds are doing out there. You can also buy them in a TFSA or RRSP, so that's pretty cool.
Anchor: There's also something called the Social Stock Market - what's that about?
Bruce: It is essentially crowdfunding, the Canadian version is called SVX, and it's a Canadian non-profit with the goal of connecting investors and entrepreneurs; entrepreneurs who focus on things like clean technology and sustainable food. As an investor, you go to the website, you login and you can look at the various options available to you. Two that struck me were SolarShare, which is a co-op that focuses on solar energy products, and another one is called Nectar which is a Bee management platform that uses artificial intelligence, so it's kinda cool. The two criticism I've heard about SVX are that the website is a little clunky, and also that it's difficult to sell your equity investment because it's not a publicly traded company - so that's just something to keep in mind.
Anchor: Now there's a number of exchange traded funds that focus on the environment; can you give us some examples.
Bruce: An ETF is like a mutual fund in that it holds a whole bunch different stocks, but generally has a lower management fee than a mutual fund because it's passive. There are many different ETF's out there, here are a couple - iShares Janzi social index, PowerShares cleantech portfolio, and the organics ETF. You can buy ETF through a discount brokerage account, or you can buy them through a financial adviser that's licensed to buy and sell stocks. So, relatively easy to get, there's a trading fee that goes with it if you buy it through a discount broker.
Anchor: Alright, what's the easiest way to get on board with this stuff then?
Bruce: The easiest way I think is through a robo-advisor, so it's a relatively new channel in the investment industry - two names. ModernAdvisor and WealthSimple have socially responsible options. Basically, the robo's are more expensive than a discount broker, less expensive than a full-service adviser. At WealthSimple the cost is about 0.5%, that's the low-cost option. The medium cost option would be using a fee-based financial adviser with expertise in the area of environmental investments. That’s call it 1% or 1.25% management fee but you have to have a fair amount of money, somewhere between 500K and a million dollars to qualify for that fee. You could also hire an investment, an environmental investment coach. GoodInvesting is one company that does this, Tim Nash is the founder. He doesn't sell products, but he says he provides research and coaching. You end up doing it yourself, but he can provide the analysis.
Anchor: What about just going to the local branch of your bank?
Bruce: You can. I'd call that the high-cost option. The pro, is that it's super easy to get them, so the social responsible mutual funds are super easy to get. The con, is that the MER, or “management-expense-ratio” can be high. I was looking at some funds out there, and their MER’s was around 2.5%. If you were getting an ETF through a discount broker at 0.3% - that mutual fund is 10 times more expensive, it's a huge difference, and that can really eat into your returns. Now, you get advice and a whole bunch of other things, but just do the check on how much you're going to pay. The great advisers out there will be fully transparent about the fees, and totally above board about it, but just check that first.
The last thing I want to say is that it relates to Earth Day and investing is that there’s a big debate underway right now about the future of pipelines in this country. You can invest and have that be the way you vote, yes or no. Trans Mountain should be built? Invest one way. The expansion should not be built? Vote another way.
Anchor: Bruce, thank you so much.
Bruce: Take care!
This interviewed was aired on April 18, 2018. For more information about CBC Radio, click here.