2 Canadian ESG Stocks for Ethical Investors

Look closely at these two TSX ESG stocks to identify investment opportunities aligning with your values without compromising on investment returns.

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Environmental, social, and governance (ESG) investing is becoming increasingly popular among investors worldwide. The number of companies committing to reducing carbon footprints within a specific period to align with the fight against climate change and other issues keeps growing each year.

Businesses across all sectors of the economy are setting ESG goals. Environmentally conscious investors now have plenty of investment opportunities in ESG stocks to profit without compromising on their values.

Today, I will discuss two Canadian ESG stocks you can consider adding to your self-directed portfolio for this purpose.

Canadian National Railway

Canadian National Railway (TSX:CNR) might not seem like an ESG stock at first glance. However, this Canadian Dividend Aristocrat can be an excellent investment for this purpose. The $105.92 billion market capitalization company headquartered in Montreal is vital to the North American economy.

Boasting the only 18,600-mile railway network connecting three coasts in North America, it transports 300 million tons of natural resources, finished goods, and manufactured products annually.

It generates solid financial results. In 2022, it increased its revenue by 18.2% and net income by 4.5%, increasing its free cash flow by 29.2% compared to the previous year. On the ESG front, Sustainalytics gives CNR stock a low ESG risk rating due to its Climate Action Plan aligning with international ESG standards.

As of this writing, CNR stock trades for $156.99 per share, boasting a 2.01% dividend yield. Down by 10.49% from its 52-week high, investing in its shares can let you own the stock for a discount.

Innergex Renewable Energy

Innergex Renewable Energy (TSX:INE) is a publicly traded company you might expect to see when searching for ESG stocks. The $2.73 billion market capitalization company develops, owns, and operates run-of-river hydroelectric facilities. It also has a substantial number of wind and solar energy farms located in North and South America and France.

Innergex is an independent power producer that has over 80 renewable energy facilities under its belt. Operating as an electricity utility company, it has a low-risk business model. 2022 saw Innergex reduce its net loss from $185.4 million in 2021 to $91.1 million. Its free cash flows rose by almost 60% year over year.

The energy sector’s transition to cleaner alternatives to traditional fossil fuels is long overdue. The company’s president and chief executive officer Michel Letellier is confident that Innergex will play a pivotal role in this transition. The company is well capitalized and ready to seize more opportunities in the renewable energy sector that can increase shareholder value while retaining a sustainable business model.

As of this writing, Innergex Renewable stock trades for $13.39 per share, down by 34.55% from its 52-week high. Currently, it pays its shareholders their payouts at a juicy 5.38% dividend yield.

Foolish takeaway

CNR stock offers you the chance to invest in a company enabling strong trade while generating exceptionally low ESG risk ratings. INE stock offers you risk-averse exposure to the growing renewable energy industry that will redefine the broader energy sector with cleaner alternatives aligning with ESG practices.

If you want to invest in companies with the potential to deliver substantial long-term wealth growth while aligning with ESG practices, CNR and INE stock should be on your radar right now.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

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