ESG Investing 2020: 6 Stocks To Watch For Brighter Future

Summary

• Canadian ESG assets swelled to nearly $3.2 trillion in 2019 from $2.1 trillion in 2017, as per the 2020 Canadian Responsible Investment Trends Report.
• Consciousness investors are looking for the right opportunities that minimize risks, improve returns, and fulfills ESG missions.
• ESG investing becomes important against the backdrop of a raging global pandemic, accelerating climate crisis, and need for socially responsible behavior.

We enter 2021 against the backdrop of a raging global pandemic, an accelerating climate and biodiversity crisis, and increasing need for socially responsible behavior. Responsible investment decisions can change the course of our planet’s future. In these circumstances, environmental, social and governance (ESG) criterion become essential in helping investors identify socially and environmentally conscious companies.

Over the last two years, Canadian markets are witnessing the rise of corporate sustainability assessment. Consciousness investors are scouting for the right opportunities that minimize risks, improve returns, and supports or fulfills the ESG missions.

Canadian ESG assets swelled to nearly $3.2 trillion in 2019 from $2.1 trillion in 2017, as per the 2020 Canadian Responsible Investment Trends Report. The study was released by Responsible Investment Association (RIA) in November 2020 and shared by Toronto Stock Exchange parent TMX Group. This represents a 48 per cent surge in responsible investment AUM (assets under management) over a two-year period.

With this rising sensibility about investors, let us look at top ESG stocks of 2020:

1. Shopify (TSX:SHOP)

Shopify stock, Canada’s largest public company, rallied 165 per cent high this year. This ecommerce stock gained on the economy’s digital transition, earning revenues of $767.4 million in the third quarter of 2020, up 96% YoY. Its net income stood at $191.1 million.

Shopify has set aside a sustainability fund, spending “at least $5 million annually” impactful technologies and solutions for climate change. The fund is diverted across 10 industries and includes two portfolios:

• Frontier portfolio, which chases the zero-carbon emission goal, and
• Evergreen portfolio that looks for carbon reduction and removal solutions for the long term.

2. Toronto-Dominion Bank (THE) (TSX:TD)

Stocks of TD Bank, one of the top lenders in Canada, have increased by almost 16 per cent in the last six months. This bluechip bank stock announced $100 billion towards a low-carbon economy via lending, asset management, financing, and internal corporate programs by 2030.

In 2019, it achieved 21 per cent reduction in Greenhouse Gas Emissions (GHG) emissions (relative to 2015 baseline) and aims zero GHG increase in 2020. TD Bank was a part of Dow Jones Sustainability World Index and Bloomberg Gender-Equality Index last year.

3. Canadian National Railway Company (TSX:CNR)

This industrial stock advanced by over 18 per cent this year and is often among the most active stocks on the TSX. Canadian National Railway transported over 3.12 million metric tonnes of Canadian grain in November, setting a new record. 

The transport company aims to move goods safely, efficiently and in an environmentally responsible manner. In 2019, CNR claims it avoided ~47,000 tonnes of carbon emissions, diverted ~90 per cent waster from landfill for reuse or recycling and has over 38 per cent women on its board of directors. The company also invested $14 million in communities’ sponsorships and donations.

4. Enbridge Inc (TSX:ENB)

Enbridge is one of the most prominent energy firms in the country. Its stocks nosedived during the pandemic-led market crash. It has recovered by 27 per cent since 2020 low of C$ 34.09 on March 19. The stock has advanced over 50 per cent in the last decade.

Enbridge’s ESG goals are in line with Canadian government’s environmental targets. The company aims to reduce GHG emissions by 35 per cent by 2030 and hit net-zero GHG emissions by 2050. It also aims to have 40 per cent women and 20 per cent members from racial and ethnic groups in the board by 2025. In 2019, the firm had five women directors out of 11 and is diversifying the asset mix with expansion in natural gas.

5. Alimentation Couche-Tard Inc (TSX:ATD)

The consumer stock went into a free fall during the pandemic crash. It has since then recovered by 40+ per cent (from March 24) and are up 6.7 per cent this year.

The convenience store and road transportation fuel retail chain’s net earnings jumped to $757 million in second quarter fiscal of 2020 as compared to $578.6 million same quarter a year ago. Revenue surged by 6.3 per cent year-over-year (YoY) to $3.8 billion.

Alimentation Couche-Tard has a 10.3 per cent renewable fuel share in Europe in 2019 and saved 35.6 million litres of water through car wash purwater reclaim systems in North America in FY20. It board comprises 30 per cent women directors. The company invested $11 million in annual community investments in FY20.

6. TELUS Corporation (TSX:T)

Canada’s top telecom giant holds 30 per cent market share and is up by 28 per cent in nearly 9 months. Telus’ consolidated revenue grew 7.7 per cent YoY to $4 billion in Q3 2020.

Since 2010, the company reported 31 per cent reduction in domestic GHG emissions and 15% reduction in domestic energy consumption. It also returned $55 million through funding community programs.

Telus aims to procure 100 per cent of all electricity requirements from renewable sources by 2025 and achieve net carbon neutral operations by 2030.