Companies that do business the right way.
Socially responsible investing is something that many Americans have taken an interest in over the last few years. The idea is simple: Put your money behind companies that share your values instead of holding a stake in corporations that may use business practices in conflict with your personal morality. A 2015 report by the Harvard Business Review found that “firms making investments and improving their performance on environmental, social, and governance (ESG) issues exhibit better stock market performance and profitability in the future.” Thankfully, a number of exchange-traded funds exist to easily package socially responsible companies for investors to buy.
iShares MSCI KLD 400 Social ETF (ticker: DSI)
The DSI ETF is a broad-based fund that tracks 400 U.S.-based companies that, according to iShares, “have been screened for positive environmental, social and governance characteristics.” One prime example is that the fund excludes corporations involved in weapons, tobacco and alcohol. Think of it as a modified version of the Standard & Poor’s 500 index, with top holdings including typical mega-cap companies like Microsoft Corp. (MSFT), Verizon Communications (VZ) and Procter & Gamble Co. (PG), among others. If you want to stick with a typical blue-chip stocks index but give a nod toward socially responsible investing, then this is a great place to start.
Expenses: 0.50 percent ($50 annually per $10,000 invested)
iShares MSCI USA ESG Select ETF (SUSA)
This fund is a more selective version of the previous ETF, with only 100 names in the portfolio based on companies with the very best ESG ratings for environmental, social and governance factors. The result is a list that is a bit less diversified, but one that is weighted based on the conduct of a company instead of its size. For instance, Ecolab (ECL) focuses on fighting disease in hospitals and food processing facilities, among other things. Its market cap of $38 billion puts it at No. 170 in the list of S&P 500 constituents, but ECL is among the top holdings in SUSA.
Expenses: 0.50 percent
SPDR SSGA Gender Diversity Index ETF (SHE)
This gender-diversity fund received a lot of attention in 2017 thanks in part to its role in the placement of the famous “Fearless Girl” statue on Wall Street that depicts a pony-tailed youngster staring down the iconic charging bull statue just a few feet away. In a nutshell, this is a fund that requires all constituents to have more female leadership than their peers. Top holding Pfizer (PFE), for instance, has a male CEO and only four of 13 top positions are held by women. But that’s much higher than most of its peers in the pharmaceutical industry, so it makes the cut based on SHE methodology.
Expenses: 0.20 percent
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
If you care enough about the environment that you want to invest in up-and-coming clean energy companies, the QCLN allows a one-stop destination. Unlike some funds that are dedicated specifically to wind or solar, this broad fund spans all manner of companies looking to fight carbon emissions. That includes solar energy icon First Solar (FSLR) but also electric vehicle powerhouse Tesla (TSLA) and low-energy lighting solutions company Cree (CREE), to name a few. It’s a diversified mixed bag of stocks, but the one thing they all share is a commitment to clean energy solutions in some way.
Expenses: 0.60 percent
SPDR MSCI ACWI Low Carbon Target ETF (LOWC)
What if you’d rather invest in big companies that simply do the best they can to protect the planet even if they have nothing to do with solar energy or electric cars? That’s where LOWC comes in. You’re investing in companies that make a concerted effort to save energy and reduce carbon emissions in their regular operations. That allows companies like Facebook (FB) to make the cut in this ETF, even though they don’t directly profit from alternative energy. Simply operating in a sustainable way, such as installing nine acres of grass and trees on the roof of its Menlo Park campus, is enough.
Expenses: 0.20 percent
Inspire Global Hope ETF (BLES)
“Socially responsible” is a blanket term, and there are many ways to slice up the market based on what you think is right and wrong. One prime example of this is the BLES ETF, which considers “biblically responsible” investing when picking its portfolio. That means omitting companies associated with abortion, gambling and other activities that many Christians are likely to feel uncomfortable with. Top holdings include homebuilder D.R. Horton (DHI) but also a hefty portion of U.S. currency as well. It’s a pretty small fund, however, with just $50 million under management.
Expenses: 0.61 percent
Workplace Equality Portfolio (EQLT)
Yet another unique play on investing in support of your values is the EQLT ETF, which consists of publicly traded companies that support lesbian, gay, bisexual and transgender equality in the workplace. A number of big companies make the cut here, including semiconductor giant Qualcomm (QCOM) and Victoria’s Secret parent L Brands (LB), so the list of 250 constituents covers a pretty wide swath of the market. If you care about LGBT rights, this is a decent way to put your cash behind your values without sacrificing exposure to popular large-cap companies.
Expenses: 0.75 percent
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These 7 Funds Make You Feel Good About Investing originally appeared on usnews.com
