In a post last month, I wrote that Canada’s oil and energy companies have taken hits recently (from media and advocacy groups – and rightly so) because of energy-giant Enbridge. I won’t repeat any details of the Enbridge pipeline-leak story – it has been well-publicized.
The environmental mess in Marshall, Michigan got me thinking and asking, pipeline-leaks aside:
Could I be an ethical investor owning Enbridge?
Am I unethical because I own it?
Ethical investing seeks to maximize financial return (for Mr. Investor) and preserve the “social good”. Socially responsible investors (ethical investors) tend to favour corporations that promote environmental causes, protect consumer groups and pride themselves on diversity, to name a few principles. I don’t consider myself an ethical investor per se but I do know I respect and value the dividend-paying companies I buy – they are quality organizations. They became quality organizations I suppose, in-part, through their corporate culture; quality exists because of organizational-lived values of trust, integrity, transparency and commitment. I never really looked at Enbridge or some other energy companies in this ethical light before, until some further reinforcement…
I’m certainly no expert in ethical investing nor the types of holdings this investment strategy would/should/could have, but I was curious what holdings were in a typical Canadian, ethical equity fund. So, I found two: Ethical Growth Fund and Ethical Canadian Dividend Fund managed by Ethical Funds.
Surprised by any of the top-10 holdings? Suncor? Barrick Gold? Goldcorp? Husky Energy?
What else was interesting?
The Portfolio Manager comments for the dividend fund:
“We eliminated our position in Enbridge Inc. (ENB) due to its increased valuation. Enbridge has a solid five year growth plan; however, we felt this growth was already priced in. We moved some of the proceeds into Metro Inc. which shows similar earnings growth to Enbridge at a much lower valuation. The slower growth we have been concerned about is becoming more evident in recent economic releases. We remain cautious in the Fund with a cash weight of 8.4% which is up from 6.6% at the end of March 2010. We adjusted the Fund’s holdings this quarter to help preserve capital. The average debt to equity was lowered and the valuation metrics have been improved.”
So as you can read, Enbridge was a top-10 holding in the Ethical Canadian Dividend Fund, but no longer. Eliminating the Enbridge position had nothing to do with environmental stewardship, consumer protection, human rights or diversity – it had everything to do with growth potential – making more money for i) the fund manager and ii) Mr. Investor. I guess I shouldn’t be surprised…
Canada’s oil and energy companies have taken their lumps recently, and they probably will for the foreseeable future from any number of advocacy or certain media groups. What happened in Marshall, Michigan due to the Enbridge pipeline-break was a disaster and nobody wants that history repeated, including Enbridge itself. Hopefully though, advocacy and media groups arguing against Canada’s energy companies like Enbridge won’t use the “ethics card” in their rationales like I’ve read about. I think that would be unfair. Canadian blue-chip companies like Suncor, Barrick Gold, Goldcorp, Husky Energy and Enbridge are arguably some of the most socially responsible companies in the world – more than people realize – and not because they show up in an ethical growth or dividend fund. Ethical investors and ethical fund managers who own these stalwarts ultimately do it for the same basic reason you and I do – to make money. I don’t see that changing anytime soon. Do you?
What’s your take on ethical investing?
Are you an ethical investor by default like me?