2020 Dividend Report

Energizing Portfolios With a Fossil Free Dividend Strategy

Research is in and an enhanced Low-Volatility, High-Yield (LVHY) fossil free dividend strategy is effective for sustainably-minded investors, even during turbulent times.

Traditionally LVHY portfolios have posed a challenge for investors wanting to align portfolios with their values, but our 13 year backtest demonstrates that, investors do not need fossil fuels to build a sound dividend strategy. Our enhanced portfolio outperformed the market benchmark over the period.*

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Stronger returns

Our enhanced Low-Volatility, High-Yield strategy for sustainable investors generated a positive return of investment, higher than the market benchmark, over the 13 year backtest.

Better impact

Divesting from fossil fuels and reinvesting your money into cleaner and more efficient energy solutions can be a sound strategy, even during turbulent times.

Lower risk

Divestment reduces exposure to the energy sector’s volatility and the associated ‘stranded asset risk’ of carbon reserves devaluing prematurely.

Myth of underperformance

We developed this report to dispel the myth of underperformance when it comes to sustainable investing.

Many investors are concerned that accounting for social and environmental impact in their portfolios means compromising return potential, especially when using a FF dividend strategy.

We have only recently integrated this enhanced strategy into the Genus Fossil Free Dividend Equity Fund, so even though performance has beaten the benchmark so far, the time frame is too short to make the alpha statistically significant. However, based on the 13 year backtests and live performance, we are optimistic of the success of this strategy for sustainably-minded investors.

Methodology & Summary

The Dividend Report examines how to build a high performing LVHY strategy that demonstrates a positive return of investment for Fossil Free investors.

Typically, long-term holdings in high-dividend portfolios tend to focus on utilities, energy, tobacco and other controversial industries, meaning that this strategy has generally posed a challenge for investors wanting to align their portfolios with their values.

However, through a 13 year backtest and a combination of new parameters, we reveal that investors do not need fossil fuels to build a sound dividend strategy, even during market downturns.

We have built an enhanced FF dividend strategy with greater stock
concentration and more accommodation for growth-minded, sustainable companies.
This strategy boosts the risk-adjusted performance significantly. Over the 13-year
backtest, the strategy captured 110% of the upside market movements and only 61% of
the downside. The annualized active return was 6.78%.**

*Benchmark

*Fossil Free CanGlobe Equity Benchmark: 35% S&P TSX Composite and 65% MSCI World (Aug 2006 -Jul 2019)

** Important Disclosure

The information contained within this document was compiled from sources Genus believes to be reliable and accurate. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. In particular, none of the examples should be considered advice tailored to the needs of any specific investor. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. With respect to the description of any investment strategies, simulations, or investment recommendations, actual results may differ as described in our materials. Past performance is not indicative of future results. Every investment program has the potential for loss as well as gain. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. The forecasted information displayed is an estimate, hypothetical in nature, and meant to serve solely as a guideline. The results and analysis are not guarantees of future results because they are derived from mathematical modeling techniques that may or may not reflect actual conditions and events. No transaction costs or management fees included. Benchmark returns are simulated using underlying holdings to ensure apples-to-apples comparison. The benchmark for back-test simulation is 35% Canadian S&P/TSX total return index and 65% MSCI World total return index. The simulated portfolios are actively managed, and the structure of the actual portfolios may be at variance to the benchmark index. Index returns reflect reinvestment of dividends but do not reflect fees, brokerage commissions, or other expenses of investing, which can reduce actual returns earned by investors. Back-testing involves simulation of a quantitative investment model by applying all rules, thresholds and strategies to a hypothetical portfolio during a specific market period and measuring the changes in value of the hypothetical portfolio based on the actual market prices of portfolio securities. Investors should be aware of the following: 1) Back-tested performance does not represent actual trading in an account and should not be interpreted as such, 2) back-tested performance does not reflect the impact that material economic and market factors might have had on the manager’s decision-making process if the manager were actually managing client’s assets, 3) the investment strategy that the back-tested results are based on can be changed at any time in order to reflect better back-tested results, and the strategy can continue to be tested and adjusted until the desired results are achieved, and 4) there is no indication that the back-tested performance would have been achieved by the manager had the program been activated during the periods presented in this document. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision.