ESG investing in Canada: How to make a positive impact with your portfolio

Key details

• What is it: ESG (Environmental, Social, and Governance) investing is a strategy that directs your money toward companies that demonstrate ethical and sustainable practices. It’s a way of investing that considers a company's character, not just its balance sheet.
• Why it matters: ESG investing gives you the power to align your personal values with your financial goals. Your portfolio can become a tool to support companies that are working to build a better, fairer, and cleaner world.
• How to start: You can research and buy individual stocks or ETFs that meet ESG criteria, or you can choose a managed portfolio that suits your personal risk profile.

A portfolio with purpose

It’s the kind of choice that looks small—the kind you make every day already.

You buy coffee from the local shop because you know the owner’s name. You choose the brand of shoes that treats its workers well. You root for the underdog. You stand up for what’s right.

You do it without thinking, because your values aren't just something you talk about—they're something you live.

So why would your investments be any different?

The belief that building wealth means closing your eyes to the world around you, propping up a wall between money and morals, is outdated. Especially as a Canadian, you have choices, simple and powerful ones that let you invest in the world you want to live in.

It’s a strategy known broadly as ethical investing, and it’s not about sacrifice. It’s about alignment.

What is ESG investing, really?

ESG is a framework that helps you look past the stock price and see the morality of a company, grading businesses on three key pillars:

• Environmental (E): How does the company treat our planet? This looks at its carbon footprint, its commitment to reducing pollution, its use of renewable energy, and its efforts to conserve natural resources.
• Social (S): How does the company treat people? This examines its relationship with its employees, suppliers, customers, and the communities where it operates. It looks at everything from fair labour practices and diversity on its board to data privacy and product safety.
• Governance (G): How is the company run? This pulls back the curtain on the corporation itself. It scrutinizes executive pay, shareholder rights, internal controls, and whether the leadership is transparent and accountable.

Through this corporate report card, you get a sense of not just whether or not a company is making money, but whether their focus is on making money *responsibly*.

What’s the difference between ESG, SRI, and impact investing?

These are the Big 3 terms generally known in the world of ethical investing. They all have their place, and are all related, but have slightly different approaches in how they achieve their aims:

• Socially Responsible Investing (SRI)
  SRI is the original values-based investing approach, and is often defined by what it *excludes*, not what it includes. An SRI strategy typically uses what’s called “negative screening” to remove companies (or even entire industries) that don’t align with a pre-determined set of values—think tobacco, weapons, or fossil fuels, for example.
• Environmental, Social, and Governance (ESG)
  ESG is what SRI has evolved into. It’s less of a boycott, and more of an endorsement. Instead of just excluding the “bad” that doesn’t fit your values, ESG actively seeks out the “good.” It uses the three pillars outlined above as a data-driven grading system to find companies that are industry leaders in sustainability and ethical practices.
• Impact Investing
  Impact investing is the most direct of the three. It steers money towards a specific project or private companies with the goal of creating a distinct and measurable positive outcome, like funding a new clean water project or a social housing development.

Why your portfolio matters: Change is the sum of small choices

The problems out there in the world are vast—there’s no denying that. But change is the sum of small choices, and the flow of money is one of the most powerful ones you can direct.

Every day, more and more money moves through the global financial system, funding companies, breaking ground on infrastructure projects, shaping the future for our generation and the next (and the next, and the next).

Your investment portfolio is your piece of that world-shaping power.

Money sends a message. Choosing sustainable investments in Canada is a vote—your vote—and one of the most direct ways you can turn the conviction that shapes your life into a clear, financial signal that says accountability can be profitable.

How to start ESG investing in Canada: two paths for your portfolio

Once you decide you’re ready to align your money with your morals, there are two main paths you can take.

Path 1: The self-directed route

If you enjoy research and want to be hands-on with your investments, you can build your own portfolio of ESG-friendly stocks and Exchange-Traded Funds (ETFs).

This involves digging into company reports, analyzing ESG ratings from various agencies, and actively managing your own holdings.

It gives you complete control, but requires a significant commitment of time and effort.

Path 2: The managed portfolio route

If you believe in the mission but don’t have the time or expertise to become an ESG analyst yourself, you can choose a managed portfolio, like our Questwealth Portfolios.

This is where our team of experts does the heavy lifting for you, building and managing a diversified portfolio based on generally acceptable ethical and sustainability criteria within the industry.

ESG investing without the stock picking

For many people, a managed portfolio is the simplest way to get started with green investing. At Questrade, we developed Questwealth SRI Portfolios for exactly this reason. They are built on the simple idea that you shouldn't have to choose between your values and your financial goals.

Our team of experts actively manages your portfolio, screening for companies that are leaders in environmental, social, and governance practices. It's a way to invest with impact, without the hours of research.

But what about performance?

It's the big question, so we did the math for you.

Historical returns vary depending on how much risk you’re open to, but whether you’re looking for aggressive growth or a more conservative approach, all our SRI Portfolio returns are on display here.