When building a socially responsible investment portfolio, I choose from a list of about 40 companies that don’t cause me to lose sleep at night thinking about dead birds, or slave labour, or nuclear meltdowns.

 I’ve followed the three companies highlighted below for years now. In fact I wrote about two of them almost 9 years ago in the summer of 2002, and they have since proven to be very good businesses. They have also rewarded patient investors who can shut out the daily noise of the market and remain focused on companies that are sustainable over much longer periods of time. 

Have a walk through the aisles at Thrifty Foods and take a look at who makes much of the healthy stuff on the shelves. Yves Veggie cuisine, Celestial Seasonings Herbal Teas, and JASON skin moisturizer are on my regular shopping list, and all are packaged by Hain Celestial (HAIN-NASDAQ) Those very good products are just the tip of what they produce and package, which runs the full gamut of health foods and skin care items. And if you’re looking for GMOs, you won’t find them in any of this company’s goods. The stock recently traded around US$26, up from $16 when I covered it in 2002, and well above its issue price of US$10 in 1997.

 Speaking of Thrifty Foods, they are of course just one of several grocery stores in our community. Their owner is Empire Company (EMP.A-TSX), who also own the popular Sobeys chain of grocery stores. Empire pays a dividend on their common shares, and owning them gives you a vote in company affairs. Maybe it’s not the most socially responsible kind of investment, but there is a lot to like about the way they do business, and Thrifty’s has clearly attracted a very loyal customer base in communities across British Columbia.

 I don’t think this town will ever see a Whole Foods Market (WFMI-NASDAQ). I can’t see how we need one given our fantastic farmers markets, the very popular and well-stocked Edible Island, and the scores of local merchants who produce some wonderful local produce that you won’t find in Thrifty Foods. Nevertheless, Whole Foods is a fixture in many cities around North America, and their commitment towards sustainability is illustrated by their comprehensive alternative energy approach. Whole Foods was the first Fortune 500 company to purchase wind power for 100 percent of its electricity use across its United States operations. And no GMOs here either. Whole Foods traded around $5 for much of the 1990s, reached $70 in January 2006, dropped to $10 midst the market despair two years ago, and now trades for over US$50.

 It is a commonly held view that corporations exist solely to maximize profit. The corollary is that all social and environmental motives take a back seat to the profit motive. So why would a company like Whole Foods Markets choose to buy more expensive renewable energies if the higher cost hurt the bottom line?

 Perhaps forward-thinking corporations understand that while ‘green’ may cost more in terms of dollars, the goodwill that is built with consumers will actually improve the bottom line. Many very loyal shoppers are clearly prepared to pay a premium for goods from a company whose policies reflect the highest social and environmental standards. As a result, economists have discovered that financial costs do not exist in a vacuum, and accountants can now measure a ‘triple bottom line’ that includes social and environmental costs and benefits, not just financial ones.  

 By now I’m sure just about everyone has heard of KIVA (www.kiva.org), the wildly successful organization that facilitates small loans to needy family businesses and entrepreneurs throughout the developing world.

 Individual KIVA lenders do not receive any interest on their loans. Rather, we enter into these arrangements solely for the satisfaction of having given someone a boost in a business that strikes a chord with us. The internet has made this quick, easy and interactive.

 Today there are scores of organizations involved in microlending. One of the very first on the scene, and still going strong after 35 years, is Netherlands-based Oikocredit (www.oikocredit.org).

Oikocredit was founded in 1975 and now has 35 regional partners around the world, including Oikocredit BC. They are a financial cooperative, composed of investors who are willing to invest their money in loans with affordable, market-related interest rates to people who have little or no collateral.

Their goal is to reach people at the grassroots level of society. When considering a project for credit assistance they use the following criteria:

• Creates jobs and incomes for groups of disadvantaged people.
• Favours projects where women are influential in management and/or implementation.
• Takes into account the environmental impact of projects and animal welfare.
• Is financially sustainable and has good management strategies.
• Can meet requirements for any government approval.

Active in 70 countries

760 project partners

85% women’s projects

Reaches over 17 million households

Repayment rate over 99%

Each $1,000 invested creates 5 jobs

Investors receive a 2% dividend

RRSP option available

Cashable anytime

No fees

35-year track record

Fair trade and ethical investments

Oikocredit supports over 50 fair trade organizations with investments amounting to 15.9 million Euros – 59% of which is devoted to cocoa, coffee and tea farmers. Here in British Columbia, investors have contributed over $3.5 million, up from $2.3 million at the end of 2009. They have welcomed 59 new investors in 2010 so far, making 300 in total, and the average amount invested was over $13,000. The minimum investment accepted is only $250.

Oikocredit is well aware that social goals cannot be taken for granted. Cases of over-indebtedness, unethical collection practices and poor transparency have called for a renewed emphasis on social performance in the microfinance sector.

The Oikocredit website includes a detailed Social Performance Report that details their initiatives in making sure that the € 394 million of loans and investments Oikocredit manages make a genuine difference.

So an oil company, at its essence simply an owner or tenant on land where oil is found, is not inherently unethical. It’s the way they get that oil from the ground to your fuel tank that can be put on an ethical scale. What efforts does the corporation make to remediate environmental disruption? How are employees and communities at the epicentre of these activities being treated? Is the result of these operations a net benefit to broader society?

When someone asks me “What makes this an ethical portfolio?”, I’ll ask them if they have a couple of hours in which to discuss the subject further. It’s not an easy answer, and not simply summed up by saying “these companies are all trying to be more sustainable”, or some similar platitude.

One way I approach this question with a client is to find some ground where we might agree that a company’s actions could not be described as unethical. That is, these companies may or may not be making the world a better place, but on balance, their negative impact on society may be negligible. Here are three examples in the fields of media, entertainment and technology.

CINEPLEX GALAXY INCOME FUND (CGX.UN-TSX) A couple of years back I took my niece and two of her friends to the movies in Toronto. I don’t remember the title, but I do remember coming out about $150 lighter. Once you’re inside the theatre, Cineplex has figured out a bunch of ways to remove bills from your wallet. It was like a midway at the exhibition inside...food, games, sport facilities, they had it all. It was a memorable afternoon of fun. Their unit trust pays a healthy 6% dividend.

SHAW COMMUNICATIONS (SJR.B-TSX) I pay these guys $115 a month to be connected. That’s about $1,400 a year, and if I survive another 30 years that comes to...phew, $42,000! No wonder their customer service is so good. That’s a whole lot of money at stake. Shares in Shaw pay a 4% dividend, and if the economy turns bad, how many people do you think will be permanently giving up their cable and internet connection?

APPLE (AAPL-NASDAQ) I have Apple-envy. Don’t think I need treatment yet, but I sure would like one of those snazzy I-things, and their computers make my PC look tired and old and cranky. But stop showing me your Mac Air, or 4G I-Phone, or other Apple gizmo, ok? My cell phone contract is up next month, and I don’t really need a new one. Apple shares traded for more than 20 years in the $10 range. Today a single share trades for over $300!

These three companies demonstrate an old adage in respect to investing. If you want to buy shares in a company, it’s a good idea to be their customer first. It’s a great way to do frontline research on behalf of your RRSP.

If share ownership is something appropriate for a portion of your savings, but the thought of investing in a mutual fund that owns tailings ponds and slag heaps disturbs you, then I sympathize. But don’t despair. If you do your homework, you can still uncover alternatives to the fossil fuel guzzlers and financiers that dominate the Canadian economy. Here are three more Canadian companies that shouldn’t make you feel like you’ve sold your soul to help fund your retirement.

MACQUARIE POWER and INFRASTRUCTURE INCOME FUND (MPT.UN-TSX) Macquarie invests in essential infrastructure businesses, which typically generate sustainable long-term cash flow as a result of consistent demand for the basic, everyday services they provide. Macquarie’s portfolio currently includes gas cogeneration, wind, hydro and biomass power generation facilities, representing approximately 350 MW of installed capacity. They are also developing a 20 MW solar power project in Ontario that is expected to start commercial operations in June 2011. These guys are not in the oil business and their commitment to renewable energy development is not a sideline activity for them, it is the core of their business. They currently pay a monthly distribution that amounts to about 9% annually.

SUN OPTA (SOY-TSX) SunOpta specializes in the sourcing, processing and distribution of natural and organic food products, including non-GMO soy, corn, sunflower and whole grains. They make soymilk, rice beverages, fruit snacks, health bars, dry roasted snacks, juices and more. They also supply retailers with teas, seeds, grains, pulses, coffee, cocoa, natural personal care products and earth-friendly household goods. SunOpta also has subsidiary companies that process and recycle environmentally friendly industrial minerals and produce organic abrasives for cleaning.

WESTPORT INNOVATIONS (WPT-TSX) Vancouver-based Westport Innovations Inc. is a leading developer of environmental technologies that help vehicles operate on clean-burning alternative fuels. They develop high-performance, fuel-efficient internal combustion engines and fuel systems for gaseous fuels such as natural gas, biomethane, and hydrogen. Westport creates complete solutions for the transition of commercial vehicle fleets from oil-based fuels to natural gas or biogas, and they are working with global automotive leaders to incorporate their technologies into future opportunities for clean vehicles.

The Canadian Business for Social Responsibility had this to say about Westport:  “Westport Innovations is working to integrate social and environmental benefits into its core business operations. For example, while its technology is evidence of a commitment to sustainability, its research and development facilities are designed and operated to minimize the environmental impact of engine testing. Westport Innovations demonstrates the win-win spirit of sustainability—working to create business value while adding value to the environment and society. This is what the future of business leadership is all about."

BP, for example, has over the years appeared on many so-called ‘ethical’ investment lists. Why? Probably because they talked a great game about wind and solar and ‘Beyond Petroleum’, much better than Exxon at least. But the talk has since been exposed as mostly hot air.

Similarly, Suncor’s oil sands operation is a staple in many Canadian mutual funds that label themselves ‘socially responsible’. So are Barrick Gold and Enbridge, both of whom are facing intense pressure to live up to environmental and social responsibilities.

To be honest with you, I don’t think those companies are in the forefront of a sustainable future, and neither do most of my clients. They’re forced to behave in a more sustainable manner by the critical eye of public opinion, and perhaps that’s a step forward in the evolution of capitalism. But we clearly have a long way to go in balancing social and environmental considerations with the profit motive.

Thus the challenge for investors who want to own shares in companies that aren’t fouling our future can be complex and daunting. I have my own list of about 40 companies that don’t cause me to lose sleep at night thinking about dead birds, or slave labour, or nuclear meltdowns. I’ll share it with you.

None of these companies are perfect corporate citizens. One could have a raging debate about the inputs, operations and stuff these companies produce. Some that have made my list might not make yours. Some are highly speculative investments, and some have been recession-proof dividend-payers. 

So here are three I’ve followed for years now. Next month I’ll report on three more. For those who don’t want to wait, give me a call or email and I’ll share the full list with you.

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DOREL (DII.A-TSX) This 40-year old Montreal firm makes furniture, baby stuff, and bicycles. I’m not too excited by their furniture, but I own one of their bikes. Dorel sells a lot of them, more than anyone else in North America in fact. I love my bike, I’d recommend it to anyone, and I hope they sell a zillion more. Shareholders are receiving a tidy little dividend while the business blooms.

KONINKLIJKE PHILIPS (PHG-NYSE) You know these guys, they’ve been making those crappy old incandescent light bulbs since forever. Those bulbs are not long for this planet, the compact fluorescent has gained a lot of traction, but it’s their LED bulbs that have the brightest future. They’re still expensive, but last much longer and consume a tiny fraction of the energy used by the old ones. That’s got to be a good idea for a carbon-constrained world.

GOOGLE (GOOG-Nasdaq) What’s not to love about Google? You can be enlightened and informed by using their services, they are advocates of open and free speech, and you don’t have to burn fossil fuels to enjoy what they offer. They also own YouTube, which makes network television look like three-day old leftovers, and a host of other very cool and functional toys and tools.

From a solely financial perspective, you could have made a small fortune by purchasing these shares when they were first offered to the public. It’s also possible to have shown a loss over shorter time frames. So please, don’t jump into any of this without understanding the risks, or your own individual predilection towards being a share owner.

And one final thought given a shaky world economy. If economic growth stagnates and falters, I still expect to be using a couple of light bulbs, a Google search function, and my bicycle.