Socially Responsible Investing – Feeling Good About Our Investments: Part 1 – Financials

Have your cake, and eat it too!

| More on:
The Motley Fool

What if you were told that you could make competitive rates of return on your investment portfolio AND promote socially responsible practices that contribute to the well-being of societies and the environment?  Not a bad combination, right?

Socially responsible investing means investing in companies that combine strong financial performance with positive social, environmental, and governance performance.

Among the questions that need to be addressed when determining if a company qualifies as a socially responsible investment are (1) does the company respect human rights and workers’ safety? (2) do the company’s activities have a negative impact on land, air or water? and (3) how is the company run, or more specifically, is there diversity among the board of directors, independence and executive compensation that is reasonable?

Back in June, Sustainalytics, a global sustainability research firm, partnered with Maclean’s to release their list of Canada’s most socially responsible corporations.  Considering that socially responsible investment assets increased 16% in 2012 and now represents 20% of assets under management in Canada, this list will definitely come in handy for many investors.

Let’s take a look at companies in the financial industry that make the grade and have proven to be socially responsible.

Bank of Montreal (TSX:BMO)

Sustainalytics listed the following reasons for Bank of Montreal making the list:

(1)   “BMO’s board diversity policy ensures that women represent at least a third of the bank’s independent board of directors.

(2)   Equity and debt financing to the renewable energy sector amounted to $3.6 billion in fiscal 2012, one of the highest among Canadian banks for that year.

(3)   BMO funds a nationwide financial literacy program that aims to educate 45,000 students on personal finance over three years.”

Looking at the financial side of things, BMO’s most recent results beat expectations, with a 17% increase in third quarter profits, as loan loss provisions dropped sharply to $77 million from $237 million and they benefitted from higher interest rates.  ROE is the lowest of the big banks, and accordingly, BMO is one of the cheapest of the banks, trading at 1.5 times book value.  It has a 4.44% dividend yield.

Royal Bank of Canada (TSX:RY, NYSE:RY)

Sustainalytics listed the following reasons for adding Royal Bank to the list:

(1)     “As part of its enhanced sourcing policy, RBC has made a public commitment to work with suppliers to address conflict minerals in its supply chain.

(2)     Underwrote Canada’s first investment-grade solar bond, issued in 2012. The $172-million bond supports two solar farms in Ontario with a combined production capacity of 40 megawatts that will feed into the Ontario power grid.”

Royal Bank also beat expectations when they reported third quarter results.  Net income rose 2.9% and the dividend was increased by 6%.


Sustainalytics listed the following reasons for adding TD Bank to the list:

(1)     “TD’s new responsible procurement policy states that the company will endeavour to source products and services that protect human rights, ethics, diversity/inclusion and the environment.

(2)     Since 2012, “TD Forests” has protected 487 hectares of critical forest habitat across North America as part of its commitment to protect more than two football fields per day of North American forest habitat over the next five years.”

TD also beat earnings expectations in the third quarter.  Investors also learned of a 5% dividend hike, as the Canadian personal and commercial banking operations saw strong results.  However, big insurance losses and disappointing investment-banking related results resulted in an overall decline in earnings.

Bottom Line

For the socially conscious investor, the companies that have been able to deliver strong financial performance on top of adopting a socially responsible culture is a great find.  We have seen examples of this in the financial industry.  Stay tuned, as we uncover more socially responsible companies from different sectors.

The Canadian banks are without a doubt some of the best businesses in the country.  For a look at three of the best that our neighbors to the south have to offer, simply click here now and download our special FREE report “3 U.S. Stocks That Every Canadian Should Own”.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Karen Thomas doesn’t own shares of any companies mentioned.  The Motley Fool doesn’t own shares of any companies mentioned.      

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

1 REIT That Pays a Monthly Distribution (With 6% Yield and 3.2% CAGR) 

It's a good time to buy REITs at a hefty discount to lock in higher passive income. This REIT pays…

Read more »

Businessman holding AI cloud
Tech Stocks

2 Stocks That Could Grow Your Portfolio Over the Next Decade

These two TSX stocks could be stellar additions to your long-term portfolio, given their multi-year growth potential and discounted stock…

Read more »

Wireless technology
Tech Stocks

These Tech Stocks Are Growing up to 138% Despite the Recession

Growth stocks like WELL Health Technologies (TSX:WELL) are thriving, despite the recession.

Read more »

close-up photo of investor Warren Buffett
Stocks for Beginners

New to Investing? Here’s 1 of Warren Buffett’s Most Important Quotes

As market uncertainty continues to intensify, here's some advice from the Oracle of Omaha to help you navigate this environment.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Want Easy Passive Income? Go With These 3 Canadian Dividend All-Stars

Are you looking for easy passive income? Here are three Canadian dividend all-stars.

Read more »

Man data analyze

3 of the Top-Growing Stocks on Earth

Canadians desperate for growth in a shaky market may want to look to growing stocks like Cardinal Health Inc. (NYSE:CAH).

Read more »

Nickel ore is mined from the ground.
Metals and Mining Stocks

Offset Market Volatility With a Shiny Investment

Looking to offset market volatility with a shiny investment you can hold for the long-term? Here’s a precious option to…

Read more »

grow dividends
Tech Stocks

BlackBerry (TSX:BB) Stock: The Best Buy for Your RRSP

BlackBerry stock is still falling after its quarterly result, despite a 28% revenue increase in its Internet of Things segment.

Read more »