Performance

Ecoportfolios

There are other investment offerings in Canada that fall under Socially Responsible Investment (SRI) or Environmentally Friendly platforms, primarily, these are based on an initial negative screening process to eliminate companies operating in morally distasteful industries (ie. tobacco, gambling, nuclear), followed by a relative screening to then select the companies that score in the top 50% of their peers on broad environmental, social and governance (ESG) measures. Very little company specific research is involved. Rather than having major (top-10) holdings in Suncor Energy and Canadian Natural Resources, both found as of July 31, 2016 in a well-known competitor’s portfolio that uses ‘more than 100 indicators for environmental, social and governance performance’, the EcoPortfolios Pure Green Portfolio counts leading renewable energy companies as top-10 holdings.

With my EcoPortfolios offering, traditional financial research is used, but I also consider extra financial factors such as carbon emissions, water usage, and corporate sustainability goals. These data, along with a diligent review of public company documents, such as sustainability reports, annual reports or management circulars leads to the inclusion or exclusion of candidate companies. 

December 2017 Commentary

During the final three months of the year, we saw some of the most volatile moves of the year in the individual security prices of the Pure Green holdings. A surprise bid in December by Xylem Inc. to acquire Pure Technologies Ltd. at a 102.7% premium to the previous days’ closing price helped to boost the gross return, in Canadian dollars for the year to exactly 20.0%, significantly outpacing the MSCI World’s CAD return of 14.4%.

We were, however, reminded that volatility works the other way also, as in the November, a top holding, Vestas plunged 27% over concerns that the Republicans’ tax reform bill would include meaningful and changes to the production tax credit (PTC) available to renewable energy companies. Vestas shares breached the $20 level briefly, after having reached nearly $33 in the summer. Fortunately, the final version of the tax reform bill contained many improvements from the original draft, including the retention of existing credits. Given that the PTCs were set to phase out by 2020 anyways, we added to Vestas after this price drop. The outlook for wind, and particularly, offshore wind remains bright in the US, and we expect Vestas to be a solid long-term performer.

Other strong performers for the year included SolarEdge Technologies (+203%), Veolia (+50%), Xylem (+38%) and New Flyer Industries (+32%), not including dividends. Conversely, Johnson Controls, purchased in July dropped 15% by year end, and TransAlta Renewables was down 7% on the year, or flat once accounting for the dividend.

Previous Months Commentary

This report is for information purposes only and the performance numbers have not been audited. All performance data represents past performance and is not indicative of future performance. All rates, yields and prices are quoted as of June 30, 2017. The author has taken all usual and reasonable precautions to determine that the information contained in this report has been obtained from sources believed to be reliable and that the procedures used to summarize such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor Scotia Capital Inc. (SCI) can make any warranty as to the accuracy or completeness of information, analysis or views contained in this report. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this report in contravention of this notice.

This publication has been prepared by an advisor of ScotiaMcLeod, a division of Scotia Capital Inc. (SCI). This publication is intended as a general source of information and should not be considered as personal investment or tax advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. Opinions, estimates, and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither SCI nor its affiliates accepts liability whatsoever for any loss arising from any use of this publication or its contents. This publication is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. SCI, its affiliates and/or their respective officers, directors, or employees may from time to time acquire, hold, or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. All performance data represents past performance and is not indicative of future performance. SCI and/or its affiliates may have acted as financial advisor and/or underwriter for certain of the corporations mentioned herein and may have received and may receive remuneration for same. All insurance products are sold through Scotia Wealth Insurance Services Inc., the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank group of companies. When discussing life insurance products, ScotiaMcLeod advisors are acting as Insurance Advisors (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc. This publication and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI.