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Kimberly Yip Woon Sun

Canadian ETFs: March’s Launches and Terminations

The Canadian ETF Industry ended the first quarter of 2021 with assets under management of $278 billion. The number of new ETF listings keeps on increasing with 23 new listings added in March. 

RBC iShares expanded its Sustainable ETFs suite with three ESG Leaders ETFs. These ETFs currently seek to track MSCI indices that are designed to provide efficient exposure to companies demonstrating more sustainable business practices relative to their industry peers, while providing sector balance and market coverage. The ETFs can be used as sustainable equity building blocks for the core of a portfolio. 

Desjardins also launched an ESG ETF. The Desjardins RI Emerging Markets – Low CO2 Index ETF (“DRME-T”) complements the range of ETFs designed to significantly reduce carbon intensity relative to traditional equity indices. Under normal market conditions, the Fund will primarily invest in large and mid-cap companies from the Scientific Beta Emerging Markets Universe while seeking to deliver a significant reduction in the weighted average carbon intensity of the Fund’s portfolio and ensuring that all Constituent Issuers meet Pre-Determined ESG Standards. 

Emerge Canada Inc. introduced Canada’s first space exploration ETF, sub-advised by ARK Investment Management LLC. The Emerge ARK Space Exploration ETF is an actively-managed exchange-traded fund that invests in global equity securities of companies that are or, are expected to be, focused on leading, enabling, or benefitting from technologically enabled products and/or services that occur beyond the surface of the Earth. Its top holdings, as of March 31st, are Trimble Inc. (“TRMB-Q”)Kratos Defence and Security (“KTOS-Q”) and L3harris Technologies Inc. (“LHX-N”). 

CI First Asset launched the cheapest bitcoin ETF, in terms of management fee. The CI Galaxy Bitcoin ETF is the World’s third bitcoin ETF. Interest in the cryptocurrency space is acceleratingThe first bitcoin ETF has already hit a billion dollars in assets under management in less than two months of tradingHorizons ETFs even came out with an inverse bitcoin ETF on April 15th for investors who want a short exposure to bitcoin.

Horizons ETFs, Harvest ETFs and Accelerate Funds have reorganized their product suite and terminated the following ETFs in March: 

BlackRock Canada lowered the management fees on its core Canadian Fixed Income ETFs, effective April 1st.

How to add ESG factors to your portfolio? Negative/ Exclusionary screening

There’s a variety of methods to incorporate ESG factors into your portfolio. In this blog post series, we go over each of them, consider their benefits and drawbacks, and see how they can be implemented using Inovestor for Advisors.

Today, we look at negative, also called exclusionary, screenings. Negative screening entails the exclusion of companies, sectors, or countries based on specific activities that go against investors’ ethics or values. 

In its early days, ESG exclusionary screens were mostly implemented to target religious investorsInvestors would screen out companies involved in products that went against their faith. For example, tobacco, alcohol and gambling are among the sectors prohibited in Islamic Finance. Nowadays, negative ESG screens are used by a broadeaudiences, filtering out companies involved in a variety of values-based factors, like controversial weapons or animal testing. 

It can also be applied to specific countriescompanies and individuals. Many countries, including Canada, impose sanctions on other countries, organizations, or individuals that are responsible for gross violations of internationally-recognized human rights, such as extrajudicial killings or nuclear programs. These sanctions prevent trade, financial transactions or other economic activity with the sanctioned countries. Portfolio managers can proactively exclude countries and companies they believe are acting in unethical ways and are expected to be sanctioned. 

Negative ESG screening is the easiest and most widely-used way to implement ESG investing. By simply excluding companies involved in activities investors condemn, they are presented with a broad investible universe cleansed from companies directly involved in unacceptable activities. And, in good news, negative ESG screening does not wipe out the majority of the investible universe. As such, this is a good introductory method to ESG investing. Unlike the other methods, idoes not involve extensive research to identify what each company is doing to be more sustainable and mitigate their ESG risks. 

The main criticism of exclusionary screens is that investors “wash their hands rather than attempt to solve the problems. It is a passive way of dealing with ESG issues. Investors may not supporting unethical companies financially, but they are not encouraging them to take more ethical approaches, either. Additionally, within ESG filters, companies not involved in immoral products are all on the same level, without actually rewarding more sustainable ones.  


As mentioned, exclusionary screening is the easiest method of incorporating ESG to your portfolio. Here are the steps to implement negative screening: 

  1. Define products, sectors or countries to exclude

It is important to know which products, sectors or countries your clients don’t want in their portfolio. Adding the definition of each negative product, sector or country in the Investment Policy Statement (IPS) as part of the Know Your Client (KYC) procedures helps portfolio managers or investment advisors during portfolio construction or rebalancing. 

2. Filter out all companies knowingly involved in these products  

Once you have identified and defined which products, sectors or countries to exclude, you can screen out all companies that are directly involved in negative products. We offer a screener with ESG data, including controversial product involvement of companies. It removes the manual and time-consuming task of identifying these companies. 

3. Apply additional screens and models to the ethical investible universe 

After removing companies involved in negative products, additional financial filters can be applied or you can apply a model to your “ethical” investible universe to create your portfolio.


Inovestor for Advisors’ screener has a new feature for subscribers who have the ESG add-on. It allows users to add ESG screens on top of other StockPointer’s filters as an overlay. We used this newly launched ESG overlay to implement a negative screen.

 We applied the following filters to companies listed on NYSE and NASDAQ: 

  • ESG exclusionary criteria: Companies not involved in “sin products” including tobacco, adult entertainment, gambling, abortion, contraceptives, human embryonic stem cell and fetal tissue. 
  • Market capitalization of $10 billion and above, 
  • A positive Net Profit, 
  • Revenue of $100 million and above, 
  • Return on Capital of 10% and higher, 
  • Economic Performance Index (EPI) of 1 and above, 
  • EPI 12-month change of 1 and above and 
  • Current SP Score of 50 and higher, 

Our final screen consists of 21 large-capitalization companies with high economic performance and purified from “sin” products.

Make sure to contact your account executive to add Sustainalytics’ ESG data if you’re not already subscribed. For a full list of this screen, click here: ESG negative screen.

Its ease of implementation and its usefulness to align investors’ values with their investments make exclusionary screening the most commonly used technique to include ESG factors in the portfolio.

Canadian ETFs: February’s Launches and Terminations

At the end of February, the Canadian ETF Industry reached a new record high of $270 billion in assets under managementThe number of ETFs listed in Canada continues to grow as we welcome the World’s first Bitcoin ETF. Once more, Canadian regulators prove to be more accepting of disruptive investment products. In the U.S, approximately ten Bitcoin ETFs have either been rejected or are still waiting approval by the SEC. Will the success of the Canadian-listed Bitcoin ETFs pave the way for our U.S. counterparts? 

In only two days of trading, the Purpose Bitcoin ETF attracted over $420M in assets under management. It will invest directly in physically settled Bitcoin, not derivatives, allowing investors easy and efficient access to the emerging asset class of cryptocurrency without the associated risk of self-custody within a digital wallet. The ETFs charge management fees of 1% each. 

Shortly after, Evolve Funds Group introduced the Evolve Bitcoin ETFIn order to compete, Evolve slashed the management fee on its Bitcoin ETF from 1% to 0.75%. Several other providers have plans to join the Bitcoin ETF frenzy, including CI Global Asset Management that only charges 0.40% in management fee. In less than a month of trading, Bitcoin ETFs are shaking the investment community and a fee war is already taking place. The next race is who will launch the World’s first Ethereum ETF. Evolve Funds Group and CI Global Asset Management have already filed preliminary prospectus and are waiting for approval. 

In other new launchesSmartBe introduced a suite of Canadian and U.S. Factor-based investing ETFs. The “value” investment style behind the SmartBe U.S. Quantitative Value Index ETF (SBQV-NE) and the SmartBe Canadian Quantitative Value Index ETF (SBCV-NE) emphasizes investing in securities that are considered undervalued, based on quantitative analysis compared to other securities. The “momentum” style of investing underpinning the SmartBe U.S. Quantitative Momentum Index ETF (SBQM-NE) and the SmartBe Canadian Quantitative Momentum Index ETF (SBCM-NE) emphasizes investing in securities with higher recent total return performance than other securities.

As part of its commitment to helping investors reach their long-term goals, TD Asset Management reduced the management fees on six of its broad market index TD Exchange-Traded Funds. After these management fee reductions, the TD ETFs will be among the lowest priced broad market index exchange-traded funds in Canada.

Why Integrate ESG in the Portfolio Selection Process?

Sustainable investing has gained traction over the past few years. According to Morningstar Research Inc., more than $1.5 billion was invested in Canadian sustainable funds in the fourth quarter of 2020 alone.

Due to its rising popularity among advisors and retail investors, Inovestor has partnered with Sustainalytics in order to cater to our client’s needs. Through this venture, we now offer ESG risk ratings for over 12,000 companies worldwide reinforced by assessment of their controversies. This new trend seems to suit both retail and institutional investor due to its risk minimization and enhanced returns characteristics. With the scoring system established, we help investors reduce the time spent on narrowing down the research.

Risk mitigation
Portfolio managers realize the significance of ESG issues as a way to mitigate risks. The scoring system used by ESG factors help identify potential risks that could negatively impact a company, such as litigations and lawsuits, strikes and bad reputations.

A good illustration of how ESG data can help identify risks is the Facebook-Cambridge Analytica scandal. Prior to the scandal, Facebook received several criticisms relating to data privacy management of users. The tipping point occurred when a whistleblower revealed that Cambridge Analytica harvested personal data from over 50 million Facebook users without their consent to interfere with the 2016 U.S. presidential election. Facebook saw 26% of users delete the app from their phones, according to a September 2018 survey by Pew Research Center. The company’s stock plunged by over 20% and had to pay $5 billion in fines to the Federal Trade Commission for privacy violations.

Improved performance
Taking ESG criteria into consideration has been associated with higher returns over time. According to MorningStar Direct, more than 60% of funds that incorporate high sustainability ratings in their model, beat their respective benchmarks as of December 31, 2020. The percentage of funds that outperformed their benchmark decreases incrementally with ESG risk category, except for funds with a low ESG rating.

Aligning investment and values
Some investors also choose to add ESG factors in their portfolio selection process to fulfill a fiduciary duty and/or values. Tobacco production, oil and gas, conventional weapons and firearms are among the sectors that are usually excluded from ESG portfolios due to their controversial nature. On the other hand, companies that exert a positive impact on stakeholders are sought-after such as electric vehicle companies and solar panel manufacturing companies.

You can access Sustainalytics’ 12,000+ ESG risk ratings by subscribing to the Inovestor for Advisors platform, which now offers ESG risk ratings in addition to investment research, idea generation, model portfolio options and portfolio analytics.

Sustainable investing is the future. Access ESG risk ratings on 12,000+ companies worldwide today.

ESG Analytics

Inovestor partnered with Sustainalytics, the largest pure-play investment research and ratings firm dedicated to responsible investment and ESG research, with over 25 years of experience in ESG and corporate governance.

This new add-on provides a mix of quantitative and qualitative ESG content and tools to help you integrate ESG factors in your portfolio and identify potential risks of companies.

To start your ESG analytics trial on over 12,000 companies worldwide, click here or contact your account executive.


The Sustainalytics company-level ESG Risk Score measures the degree to which a company’ s economic value may be at risk driven by materially relevant ESG factors. The ESG Risk Score is based on a two-dimensional materiality framework that measures a company’s exposure to sub-industry specific material risks and how well a company is managing those risks. ESG Risk Scores are categorized across five risk levels: negligible, low, medium, high and severe. The scale is from 0–100, with 100 being the most severe.
This data point measures the degree to which a company is exposed to risk driven by environment, social or governance issues. The methodology was developed by Sustainalytics in the Fall of 2018 and captures the total exposure of a company’s economic value to ESG risk. This ESG risk is then broken down into various parts: unmanageable, manageable, managed and unmanaged. The unmanaged portion is the Sustainalytics ESG Risk Rating.
Under Sustainalytics methodology, at the company level, this data point represents the portion of ESG risk that a company manages through its policies, programs, management systems etc. The remainder of the manageable risk is called Management gap.
Company Environmental Risk Scores from Sustainalytics measure the degree to which a company’s economic value may be at risk driven by environmental factors. The environmental risk represents the unmanaged environmental risk exposure after taking into account a company’s managment of such risks. The Environmental Risk Scores are displayed as a number between 0 and 100, though most scores range between 0 and 25.
Company Social Risk Scores from Sustainalytics measure the degree to which a company’s economic value may be at risk driven by social factors. The social risk represents the unmanaged social risk exposure after taking into account a company’s management of such risks. The Social Risk Scores are displayed as a number between 0 and 100, though most scores range between 0 and 25.
Company Governance Risk Scores from Sustainalytics measure the degree to which a company’s economic value may be at risk driven by governance factors. The governance risk represents the unmanaged governance risk exposure after taking into account a company’s management of such risks. The Governance Risk Scores are displayed as a number between 0 and 100, though most scores range between 0 and 25.
Name of the top 3 material ESG issues considered by an analyst to be high priority and has a company-specific, analyst written analysis in the ESG Risk Rating report.
Sustainalytics provides an assessment of controversies using news screens of over 60,000 sources. A news report of an issuer’s alleged or actual misconduct is assessed to determine stakeholder impact and reputation risk within 48 hours of the event. Sustainalytics evaluates 10 different topic areas on a rating scale from 0–5 where 5 is the most severe.
Sustainalytics product involvement data points identify the nature and extent of a company’s involvement in a range of product and business activities for screening purposes.
ESG Analytics has also been added to the My Portfolios module. You can assess the overall ESG risks of your portfolio and identify the elements pertaining to these risks, whether it is due to environment, social or governance factors.

Click here to add ESG analytics to your account.

Canadian ETFs: January’s Launches and Terminations

The Canadian ETF industry reached $260 billion in assets under management at the end of January. The Canadian ETF product line-up continues to expand. New solutions consist mostly of thematic ETFs to cater to changing investor needs.

In the ESG space, Harvest ETF and BMO both launched a clean energy ETF. The Harvest Clean Energy ETF (HCLN-T) invests in a portfolio of the 40 largest Clean Energy Issuers selected from the Clean Energy Investable Universe that are listed on select North American, European and developed Asian stock exchanges and are categorized as renewable energy or renewable energy generation. The BMO Clean Energy Index ETF (ZCLN-T) seeks to replicate the performance of the S&P Global Clean Energy Index, net of expenses. The S&P Global Clean Energy Index is based on the S&P Global Broad Market Index, which includes large, mid and small capitalization companies across developed and emerging markets. The Index aims to capture the performance of companies whose primary business is clean energy, by way of clean energy production or clean energy equipment & technology.

Evolve ETFs introduced Canada’s first Cloud Computing ETF. The Evolve Cloud Computing Index Fund (DATA-T) focuses companies that are directly involved in the cloud computing industry in developed markets. Cloud computing is a technology which allows users to take advantage of computing services, storage space, and processing power through the internet, without the need for their own hardware and software. The global pandemic has increased digitization and the demand for cloud computing services.

Horizons ETF launched the world’s first psychedelic ETF, Horizons Psychedelic Stock Index ETF (PSYK-NE). It provides exposure to North American publicly-listed life sciences companies focussed on psychedelic medicines, and other companies with business activities in the psychedelics industry. In less than a month since its launch, the ETF already reached approximately $52 million in assets. “We launched the world’s first Cannabis-focused ETF in 2017, the Horizons Marijuana Life Sciences Index ETF (HMMJ-T), and we see many similarities between that industry in 2017 when it was in its infancy to the psychedelics industry now. We see the potential for significant growth from this new sector like what we have witnessed with the Cannabis industry during the last few years.” said Mr. Hawkins, President and CEO of Horizons ETFs. “At Horizons ETFs we strive to be at the forefront of key global transformative investment themes. We believe the opportunities with psychedelics not only provide a compelling investment case, but also the potential to provide life-changing impact for those suffering with mental illness.”

Source: Inovestor Inc.

Number Cruncher Extra – Eleven industrial stocks that meet our criteria in the North American markets

In last week’s Number Cruncher written for the Globe and Mail, we looked at high quality industrial names whose short-term operational returns continue to improve. The first company that came up on our screen was Westshore Terminals Investment (WTE).

The above chart shows that WTE’s EVA and Net Operating Profit have been trending upward since the first quarter of 2017, while prices remained within the $20 to $27 range. During the same period, WTE’s rising bottom-line along with decreasing number of shares contributed to diluted EPS to double as shown in the next chart:

Relative to its peers, WTE has an outstanding performance score of 72.9 with a comparably low risk score of 40.1. Its high performance score is attributable to high and increasing Return on Capital and Performance Spread. The company ranked in the 90th percentile in both metrics. Return on Capital was 20.5% as of Sep 2019 while Performance Spread, the difference between Return on Capital and Cost of Capital, amounted to 10.4% as of Sep 2019.

For subscribers to StockPointer, you can select the link below and adjust the screener to your liking.


Canadian ETFs: Increased Competition Lead To Lower Fees And An ETF Provider To Exit The Industry

In this research report created this month for The Globe And Mail, we look at Canadian ETFs: October’s launches and terminations.

As competition is getting increasingly fierce, the cost of ETFs is becoming lower and lower. An ETF provider announced that it is exiting the ETF market by selling its Canadian ETF subsidiary to another sponsor.

CI Financial Corp., the parent company of CI Investments which manages the CI First Asset Exchange-Traded Funds, will acquire WisdomTree’s Canada ETF business. Upon completion of the transaction, CI will add 14 TSX-listed ETFs with $958 million in assets (as of November 4, 2019) to its current ETF family. The WisdomTree Canada ETFs will be rebranded CI WisdomTree ETFs and WisdomTree will continue as the index provider for the WisdomTree Canada ETFs that currently track WisdomTree’s proprietary indexes. WisdomTree Canada also announced that it will be terminating WisdomTree U.S. High Dividend Index ETF on or about January 31, 2020.

The race to lower fees continues as investors are more aware of the effect of fees on their returns. Vanguard cut the management fee on one of its largest equity ETFs, the Vanguard FTSE Global All Cap ex Canada Index ETF (“VXC”), by five basis points from 0.25% to 0.20%. In addition, Vanguard has also reduced the total cost of ownership with the VXC by simplifying the structure to remove a second layer of taxation with a lower withholding rate.

Horizons ETFs also announced that it lowered the management fees on three of its technology sector ETFs and its ESG ETF by up to 23 basis points.

Source: Inovestor Inc.

In new launches, IA Clarington introduced Active ETF Series for three additional mandates, the IA Clarington Floating Rate Income Fund (“IFRF”), IA Clarington Global Allocation Fund (“IGAF”) and IA Clarington Strategic Income Fund (“ISIF”). Active ETF Series provide access to the same strategies, exposures and portfolio managers as iA Clarington’s standard mutual fund series, but in an investment that trades like a stock.

Source: Inovestor Inc.

IFRF seeks to generate a stream of current monthly income by investing primarily in senior floating rate loans, other floating rate securities and debt obligations of investment grade and non-investment grade North American and global corporate issuers.

IGAF combines a concentrated global equity portfolio with a high conviction U.S. and global fixed income allocation. Security selection is driven by bottom-up fundamental research. Managers look for valuation disparity in the market place to position the portfolio where the greatest risk/reward opportunities lie, which typically runs counter to macro trends.

ISIF seeks to provide a consistent stream of income and capital appreciation by investing primarily in Canadian equity and fixed income investments. The fund may invest up to 49% of its assets in foreign securities.

Find the full report here

This article is written by Kimberly Yip Woon Sun,  ETF Analyst at Inovestor Inc.

Wave of new products hits ETF market

In this research report created this month for The Globe And Mail, we look at Canadian ETFs: September’s launches and terminations.

The Canadian ETF industry ended September with assets under management of $188-billion. A wave of new products was launched during the month and three providers announced ETF closures.

New additions include two alternative ETFs from AGF Investments, the AGFiQ US Market Neutral Anti-Beta CAD-Hedged ETF (“QBTL”) and the AGFiQ US Long/Short Dividend Income CAD-Hedged ETF (“QUDV”). Each of the ETFs charges a management fee of 0.55%.

QBTL seeks performance results that correspond to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index (CAD-Hedged). The index is market neutral and sector neutral – meaning the number of long and short positions in each sector in the index approximate the weighting of that sector in the index universe. It is designed to capture the spread return between the long positions on low-beta companies and short positions on high-beta companies.

QUDV seeks performance results that correspond to the price and yield performance, before fees and expenses, of the Indxx Hedged Dividend Income Currency-Hedged CAD Index, a sector neutral index which is designed to measure the performance of a strategy utilizing three portfolios: long positions on high dividend paying companies, short positions on no or low dividend paying companies, and a long position in the Indxx Cash Index.

The industry is saturated with over 700 ETFs in the Canadian universe, ETFs that are not lucrative are being terminated or merged with other funds. For instance, as a result of a purchase and sale agreement, whereby Hamilton ETFs will acquire the management contract of Purpose Global Financials Income Fund (“PFG”), PFG will merge into the Hamilton Australian Financials Yield ETF (“HFA”), effective on or about October 25, 2019.

Source: Inovestor Inc.

As investors are increasingly aware of effects of fees on their returns, asset managers are lowering fees to stay competitive. Mackenzie Investments slashed fees on its traditional index ETF suite by up to 10bps, making these ETFs among the most affordable ones in their respective categories.

Source: Inovestor Inc.

Find the full report here

This article is written by Kimberly Yip Woon Sun,  ETF Analyst at Inovestor Inc. 

Canadian market sees flood of new ETFs in August

In this research report created this month for The Globe And Mail, we look at Canadian ETFs: August’s launches.

The Canadian ETF industry reached a new record high of $186-billion in assets under management at the end of August. The momentum of ETF launches is not slowing down with 14 additions to the Canadian ETF product line-up, including a unique ETF by First Trust Canada and eight new ETFs by RBC iShares.

First Trust launched an ETF alternative to structured products, the First Trust Cboe Vest U.S. Equity Buffer ETF – August (AUGB.F). It seeks to shield investors from the first 10 per cent of losses, based on the price return of the SPDR S&P 500 ETF Trust (SPY), while capping returns at pre-determined levels over the target outcome period. Specifically, the fund’s investment objective is to provide unitholders with returns (before fees, expenses and taxes) that match the price return of the SPDR S&P 500 ETF Trust, up to a 13.18-per-cent cap (before fees, expenses and taxes), while providing a buffer against the first 10 per cent (before fees, expenses and taxes) of a decrease in the market price of the underlying ETF over a period of approximately one year – from the third Friday of August of each year to on or about the third Friday of August of the following year.

RBC iShares expanded its asset-allocation ETF offering with the introduction of three iShares ETFs, the iShares Core Income Balanced ETF Portfolio (XINC), the iShares Core Conservative Balanced ETF Portfolio (XCNS) and the iShares Core Equity ETF Portfolio (XEQT). Each of them has a management fee of 0.18 per cent. The new funds add to the iShares Core ETF Portfolio offering. One-ticket ETF portfolios have gained popularity among investors. These DIY funds provide simple, low-cost and diversified investment solutions that are slowly replacing the need for robo-advisers. All the major ETF providers offer one-ticket solutions: RBC iShares, BMO, Vanguard and Horizons.

RBC iShares also introduced five single factor ETFs earlier this week. Each ETF offers exposure to a distinct style of investing – Quality, Momentum, Value and Size. The iShares Edge MSCI USA Quality Factor Index ETF (XQLT), the iShares Edge MSCI USA Momentum Factor Index ETF (XMTM) and the iShares Edge MSCI USA Value Factor index ETF (XVLU) track the MSCI USA Sector Neutral Quality Index, the MSCI USA Momentum Index and the MSCI USA Enhanced Value Index, respectively. The iShares S&P U.S. Small-Cap Index ETF (XSMC) and the iShares S&P U.S. Small-Cap Index ETF (CAD-Hedged) (XSMH) seeks to replicate, to the extent possible, the performance of the S&P SmallCap 600 Index and the S&P SmallCap 600 Index (CAD-Hedged). The addition of XSMC and XMSH further broadens RBC iShares’s comprehensive range of U.S. equity exposures, including total market, and large-, mid- and small-capitalization exposure.

Find the full report here

This article is written by Kimberly Yip Woon Sun,  ETF Analyst at Inovestor Inc.