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Jory and Jill’s Personal Impact Investing Journey: Part 10


As new parents we are adjusting to living in virtual isolation with our son during these strange and scary times; we worry about the long-lasting impacts psychologically and socially. Outside of our little family bubble, the pandemic has threatened people’s livelihoods and created chaos in the global markets. Investment strategies have needed to adapt to the market volatility. In this post I share an investment Jill and I initially made before the pandemic; we allocated even more capital to the investment after the pandemic. Let me explain.

Two posts ago I wrote about how Jill and I purchased a home. In order to do that, we liquidated as much of our portfolio as possible and secured a mortgage. After the home purchase was finalized, we eventually ended up with leftover cash, which totaled over half of our now much diminished investment portfolio.

We used some of that cash to make a small investment (see previous post) and then a much larger one in CI First Asset MSCI World ESG Impact ETF. This ETF is offered by the Toronto-based investment manager, CI Investments, and is the focus of this post.

As a reminder, an ETF (exchange-traded fund) is similar to a mutual fund in the sense that it’s an investment vehicle that typically holds a collection of stocks or securities. While mutual funds are more actively managed, which means they buy and sell securities often, ETFs are more passively managed. ETFs tend to buy and sell holdings less frequently and do so at set times throughout the year. Generally, active management and mutual funds are associated with higher product fees, while passive management and ETFs are typically the lower cost option for investors.

The CI First Asset MSCI World ESG Impact ETF is composed of global equity holdings. The holdings are companies based in countries around the world that have a limited carbon footprint, are strong performers along environmental/social/governance metrics, and earn a substantial portion of their revenue by contributing to the outcomes of the United Nation’s Sustainable Development Goals.

The companies provide solutions to some of our world’s biggest social and environmental problems. Companies like Tesla (electric vehicles), Kimberly-Clark (sanitary products and medical instruments) and Gilead Sciences (innovative medicines, antiviral drugs) are some of the ETF’s biggest holdings.

I know CI Investments well through my work at Toronto-based Inspirit Foundation. In 2019, Inspirit searched for a new investment product for the global equity portion of the Foundation’s portfolio. The investment product needed to satisfy Inspirit’s financial performance, carbon footprint, and positive impact goals. After a thorough market search, Inspirit decided to direct its global equity portfolio allocation to the CI MSCI World ESG Impact Fund. Inspirit seeded the fund by becoming its first investor.

The structuring of that investment is a little complicated. At a high level, Inspirit invested in a fund that has the ETF I mentioned above as its only holding, along with a little bit of cash sitting in the fund. The reason Inspirit invested in the CI MSCI World ESG Impact Fund over the CI First Asset MSCI World ESG Impact ETF is because of a favourable pricing strategy that rewarded Inspirit for being the fund’s first investor.

The fund has a more flexible fee structure than the ETF. Since the ETF is available to all investors, big and small, it has more rigid costing that cannot accommodate exceptions. The fund, on the other hand, targets larger institutional investors and can discount fees based on variables like the size of the investor and whether they are an early adopter. You can read more about Inspirit’s decision to invest in the CI MSCI World ESG Impact Fund here.

As I knew the fund well through my work at Inspirit, Jill and I initially invested in the CI First Asset MSCI World ESG Impact ETF before the pandemic. In order to decrease the average price we paid for the ETF, we allocated additional capital throughout the pandemic when the price was lower than when we initially invested. At the time of writing, performance of both the ETF and fund have been extremely strong year to date, considerably outperforming industry-standard benchmarks.

For Jill and I, there are two other changes to our portfolio. The first is that before the pandemic we liquidated our allocation to the NEI Environmental Leaders Fund to prepare for investment in the CI First Asset MSCI World ESG Impact ETF. Both investments are classified within the global equity asset class; however, as the NEI Environmental Leaders Fund carries relatively high fees, I felt like this was a necessary step to reduce the total cost associated with our portfolio.

The other change is the maturity of our investment in the Youth Social Innovation Capital Fund, an impact investing fund that supports young entrepreneurs and their social enterprises. This investment had a five-year term and was repaid to us in full, along with an annualized interest rate of 8%. For transparency’s sake, you should probably know that I used to be the managing director of Youth Social Innovation Capital Fund and now sit on the board of directors.

Prior to our purchase of the CI First Asset MSCI World ESG Impact ETF, the liquidation of our allocation to the NEI Environmental Leaders Fund, and the maturity of our investment in the Youth Social Innovation Capital Fund, only 28% of our portfolio could be classified as impact investments. After those transactions, 65% of our portfolio now has positive impact.

Before our allocation to the CI First Asset MSCI World ESG Impact ETF and the investment exits listed above, half of our portfolio was sitting in cash. After the purchase of the ETF, 28% remains in cash. This is still significantly above the target and gives us enough cash on hand to make some opportune investments if markets continue to be volatile.

Our global equity portfolio allocation doubled from 29% to 58%, making that asset class overweight compared to our target. The other asset classes are underweight compared to target, except for our portfolio allocation to public fixed income as it is right on target at 0%. If opportunities emerge, we’ll be putting our idle cash to work in order to continue to align our portfolio asset allocation mix with our targets. In future posts I will outline those impact investments.

In the meantime, despite the chaos and volatility caused by the pandemic, we are grateful to have a safe and secure home for our family. .

Disclaimer: This blog post is not investment advice nor is it an investment recommendation, so don’t take it as that and don’t rely on it! Seek independent professional investment advice.