New Trend in 2022: Pandemic-induced Sustainable Investing

Next year could see more Canadians adopting the responsible investing strategy.

| More on:
edit Businessman using calculator next to laptop

Image source: Getty Images.

Investors use various strategies to achieve financial success. Sustainable or responsible investing could be the trend in 2022. It’s a strategy where investors consider environmental, social, and corporate governance (ESG) factors before making an investment decision.  

Your investment is ESG-based when you lean toward companies that help solve environmental and social problems. It’s the next big frontier, says Marie-Justine Labelle, head of responsible investment at Desjardins Investments. According to Canada Life, research suggests that 72% of Canadians are interested in responsible investing.

Promote positive social change

The concept of sustainable investing is gaining in popularity. Investors evaluate investment prospects not only on the potential to deliver financial gains but also on how they promote or contribute to positive social change. Today’s general goal is to achieve a triple bottom line – profit, people, and the planet.

Canada’s top five pension fund managers, including the Canada Pension Plan Investment Board (CPPIB), increased their investments in leading oilsands producers in Q1 2021. The recipients promise to green their portfolios in exchange for the additional US$2.4 billion investment.

Suncor Energy (TSX:SU)(NYSE:SU) and Imperial Oil (TSX:IMO) are two of the four beneficiaries of the investment boost by the pension funds. Furthermore, both are members of the Oil Sands Pathways to Net Zero alliance, including Canadian Natural Resources, Cenovus Energy, and Meg Energy.

The alliance has a three-phase plan where each phase has emission reduction assumptions. These five companies hope to achieve net-zero (neutral) emissions from oil sands operations by 2050.

Not a sacrifice to higher returns

Some investors think responsible investing translates to lower return to investment. For example, Suncor Energy slashed its dividends by 55% in Q1 2021 but recently returned the payout to pre-pandemic levels.

The $36.56 billion oil bellwether sacrificed losing its Dividend Aristocrat status last year to preserve capital and protect the balance sheet. It was a painful but wise move by management. Fast forward to Q3 2021 and Suncor reported operating earnings of $1.043 billion compared to the $338 million operating loss in Q3 2020.

Management credits higher crude oil prices and refined product realizations for the considerable operating earnings. Notably, funds from operations increased 99.8% to $2.641 billion versus the same period last year. Regarding its ESG commitment, Suncor targets annual emission reductions of 10 Mt across its value chain by 2030.

The energy stock trades at $31.82 per share (+52.68% year to date) and pays a 5.28% dividend. Suncor paid a total of $309 million in dividends to shareholders in Q3 2021.

Long-term hold

Imperial Oil is a top choice of long-term investors. The dividend track record of this $30.63 billion is 140 years and has raised its dividends for 26 consecutive years. At $41.79 per share (+76.92% year to date), you can partake of the 2.58% dividend. The yield is modest, but the payouts should be rock-steady for decades.

Like Suncor, Imperial Oil generated significant cash flow from operating activities ($1.9 billion) and free cash flow ($1.68 billion) in Q3 2021. Its upstream production (435,000 gross oil-equivalent barrels per day average) during the quarter was also the highest in more than 30 years. Dividend payments reached $500 million.

Healthy returns

Sustainable choices on the TSX are growing. Suncor Energy and Imperial Oil are ESG investments that will deliver healthy returns to would-be investors.

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.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends CDN NATURAL RES.

More on Dividend Stocks

stock analysis
Dividend Stocks

Buy These TSX Dividend Shares Next Week

Are you looking for dividend stocks to add to your portfolio? Buy these picks next week!

Read more »

edit Safety First illustration
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

These three dividend stocks are all high-quality companies with defensive operations, making them some of the safest investments in Canada.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

3 Stocks to Anchor Your Portfolio in a Rocky Market

Three stocks are solid anchors in any portfolio today for their outperformance in a weak market and defiance of the…

Read more »

money cash dividends
Dividend Stocks

3 Solid Dividend Stocks That Cost Less Than $30

Given their solid financials and healthy cash flows, the following under-$30 dividend stocks are a good buy in this volatile…

Read more »

grow money, wealth build
Dividend Stocks

2 High-Yield Dividend Stocks With Rock-Solid Payout Ratios

These two dividend stocks offer unbelievably high yields of more than 7% and earn more than enough free cash flow…

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

5 Steps to Making $500 in Monthly Passive Income in 2023

Generating monthly passive income isn't as hard as it sounds. Here are 5 steps to start making $500 every month.

Read more »

sad concerned deep in thought
Dividend Stocks

Worried About a Recession? Invest in This Stable Dividend Stock to Rest Easy

Stable dividend stocks bought primarily for their payouts can offer you surety of returns, even during a recession.

Read more »

A golden egg in a nest
Dividend Stocks

How to Turn $50,000 Savings Into a Generous Nest Egg in 2 Decades

Build a generous nest egg in 20 years by investing your accumulated savings in Dividend Aristocrats and holding them in…

Read more »