Bank on your eco future

RRSP cash to sink somewhere? Here’s where the grass is greener


With a recession rolling in, the stock market a flame-out and RRSP season upon us, you might be a little confused as to where you should sink your cash.

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Yes, putting your money anywhere but under your pillow can seem like a kooky idea right about now, but don’t forget there’s a happier R word to plan for – retirement. And darlin’, if you plan on lawn bowling on pesticide-free greens in fresh, breathable air, along ocean coastlines above sea level, you should definitely be investing in a greener future any which way you can.

But I’ll be blunt: on the whole, green and ethical funds have suffered just as much as the dirty, unethical ones. There’s no hiding from this economic mess. Of course, some ethical funds are doing a little worse, like, say, those that stayed away from dirty gold, for good reason. But guess what? Gold stocks do well in a recession.

Others are outperforming their non-ethical peers. (Ethical Funds says its Special Equity, Global Dividend and American Multi-Strategy Funds are doing better than their peers, but it’s also best to get advice from a financial adviser: socialinvestment.ca has a list.)

But crunching mutual fund numbers in the short term isn’t all there is to it. Allow me to paraphrase Kevin Ranney of Jantzi Research: shorter-term thinking is what got us into this financial pickle. If we want a sustainable economy, we need to think long- term.

And in the longer term, funds that invest in companies with positive environmental, social and governance records are more likely to be successful. Translation: after the financial sky stops falling, companies that have built sustainability into their business model should deliver the Benjamins, or in the case of Canadian $100 bills, the Sir Robert Bordens.

As the ice caps keep on thinnin’, companies pushing solutions in alternative energy, clean tech, clean water, pollution prevention – you name it – have some serious growth potential. And that puts green investors in a prime feel-good position, especially as governments start waking up and smelling the pending climate chaos.

Okay, so Harper isn’t helping us out too much on this front, but with Obama injecting $150 billion in clean-energy infrastructure over the next 10 years and McGuinty talking green energy, green funds should get a boost.

But don’t get the wrong idea about ethical funds. Ethical and green funds are not one and the same. While ethical funds screen out tobacco, defence contractors, nukes and big baddies like Exxon Mobile, they otherwise invest in many of the same companies as your typical funds.

You’ll spot oil and gas corps and even some mining companies on your investors’ statement, just like everyone else’s.

But there’s a crucial difference here. Good SRI (socially responsible investment) funds like top-performing Ethical Funds and Meritas take it one very important step further. They work it from the inside, flexing their shareholder muscle to change imperfect companies one step at a time. Ethical Funds, for instance, has filed shareholder resolutions against Enbridge over First Nations grievances about its Northern Gateway pipeline project in Alberta and BC.

And very importantly, they divest from companies that don’t accede to that pressure to improve. (Ethical Funds, for example, divested from sporting goods retailer the Forzani Group for not following through on a commitment to come up with ethical supplier standards.)

Many other SRI funds, especially those affiliated with major banks, are what ethical financial adviser Ryan Colwell calls “SRI light.” They screen out tobacco, nukes and weapons and sit on their butts the rest of the time. So be sure you seek out funds that are big shareholder activists.

And, yes, even green-dedicated funds like Acuity’s Clean Environment Equity Fund still invest in oil and gas they just invest in what’s considered “best in sector,” aka the greenest of their peers, as do good ethical funds.

If you’re a purist looking for strictly eco investments in wind, solar and the like, your options are decidedly limited, but check out Algonquin Power (algonquinpower.com) or Macquarie Power & Infrastructure Income Fund (macquarie.com). Or talk to a green financial) adviser about picking responsible stocks.

Some investors say green funds are riskier. But Andrew Heintzman of Investeco (by the way, if you’ve got, oh, $150,000 to invest, these are the guys to call) says there’s no denying that when energy prices rebound (as they’re bound to), the alternative energy sector will be well positioned to reap the planetary rewards.

In fact, some sectors, like solar hot water heaters and geothermal, have been weathering the economic storm quite pleasantly.

Bottom line, the green sector will lead us out of this recession. I’d bank my future on it. In fact, I’ll do just that when I line up for more sustainable RRSPs next week.

Of course, if this is all too much risk for your market-tattered soul, just get yourself some GICs (aka guaranteed investment certificates) from a green bank like Citizens. You won’t see big returns, but there won’t be any nasty surprises, and your blood pressure might thank you for taking it easy just for this year.

adriav@nowtoronto.com

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