These mutual funds and ETFs help you invest with a conscience.
If you’re a glass-half-empty kind of person, there are a lot of reasons to be negative about the state of things in 2022. Wealth inequality is only getting worse, systemic racism is persistent and insidious across America, and we are a long way from making tangible progress on the global climate emergency. However, investors don’t have to just shrug and throw their lot in with the old way of doing business on Wall Street. There are investment options out there that allow you to put your hard-earned savings to profitable use without sacrificing your values. The following seven funds are all socially responsible investments that offer different ways of making sure you can invest profitably — but also with your conscience clean.
1919 Socially Responsive Balanced Fund (ticker: SSIAX)
As the name hopefully implies, the Socially Responsive Balanced Fund is not just a simple overlay to the typical large-cap index and instead looks to provide a balanced but socially responsible approach to investing. While total assets under management stand at just $700 million, it has been around for an extremely long time with an inception date of 1992. This fund is technically an asset allocation fund, with 30% of assets in low-risk investment-grade bonds and 70% in stocks that are “conducting business in a socially responsive manner.” So if you’re not looking to layer on a socially responsible strategy and instead want a one-stop shop, SSIAX could be worth a look.
iShares ESG Aware MSCI USA ETF (ESGU)
With about $22 billion in assets, ESGU is in many ways the go-to option for socially responsible investors. It is 100% invested in large and liquid U.S. stocks, but its 300 or so components are meant to represent the top stocks that also have “favorable environmental, social and governance (ESG) ratings.” With a lack of good benchmarking in the U.S. for those criteria, that admittedly means ESGU is more of an exclusionary fund than anything else, as it cuts out the worst offenders. However, if you want a simple and affordable way to invest in a socially responsible manner then take a look at this leading iShares product.
Parnassus Core Equity Fund Investor Shares (PRBLX)
Even though it doesn’t advertise the ESG acronym in its name, this Parnassus fund is one of the largest mutual funds dedicated to socially responsible investing. It has roughly $25 billion in assets under management at present — and furthermore, its oldest manager has been at the helm for more than 21 years. You’d be hard-pressed to find a more established mutual fund out there with an ESG angle, but one thing to be aware of is that PRBLX is incredibly focused with a short list of about 40 total stocks right now, and about 11% of assets in Big Tech duo Microsoft Corp. (MSFT) and Google parent Alphabet Inc. (GOOG, GOOGL). That means you’re relying on a short list of companies for your performance — but considering the fund hasn’t fared much better or worse than the S&P 500 year to date, that doesn’t seem to come with too much additional risk.
iShares Global Clean Energy ETF (ICLN)
If you care most about climate change and want to make sure your portfolio is investing in the companies building our clean energy future, then ICLN is for you. The roughly 100 stocks that make up this fund are a who’s who of wind, solar and alternative energy sources. Top positions at present include $24 billion solar player Enphase Energy Inc. (ENPH), leading over-the-counter turbine company Vestas Wind Systems A/S (VWDRY), and even utilities that have heavily invested in alternative sources ranging from hydroelectric to biomass, such as Consolidated Edison Inc. (ED). Admittedly, the fund hasn’t done well in 2022 as fossil fuel companies have been all the rage and rising prices pinch margins in the near term. However, based on the long-term potential of clean energy and the real risk of climate change, this could be a wise long-term holding for those who want to invest in a carbon-neutral future.
Vanguard FTSE Social Index Fund Admiral Shares (VFTAX)
With a rock-bottom expense ratio of just 0.14%, or $14 annually on every $10,000 invested, this mutual fund is just as cheap — if not cheaper — than many ESG-related funds that are exchange traded. The fund is also well established with more than $14 billion in assets under management. VFTAX is tied to an index that’s comprised of about 500 large and midsize stocks while excluding any company in industries that include alcohol, tobacco, weapons, fossil fuels or gambling. If you’re concerned with female representation on corporate boards or human rights issues then this may not be the best fit for you, but it’s a simple and popular way to skew your investments toward a more socially conscious strategy.
WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE)
This fund may sound a bit odd, but the harsh reality is that there are a host of state-run corporations that trade on public exchanges — meaning shareholders can ostensibly share in the profits, but have very little say in the governance or activities of these organizations. These include oil giants Saudi Aramco and Russia-owned Rosneft as two prominent examples, and two countries that rub many American investors the wrong way. If you want to invest in emerging markets but want to avoid state-owned enterprises, or SOEs, it can be difficult considering the scale and connections of these state-run giants. XSOE helps out, by allowing you to invest in regions like China and the Middle East without worrying about supporting a government with values you may not agree with.
TIAA-CREF Core Impact Bond Fund (TSBIX)
An actively managed bond fund, TSBIX is a rare option for folks who want fixed-income investments without exposure to equities but also insist on a fund that exhibits core ESG principles. Specifically, TSBIX invests directly in economically disadvantaged or marginalized communities including supporting affordable housing markets across the United States. The fund yields about 3.3% at present, and is very attractive to investors who seek to contribute to social change through their investments instead of just supporting the latest bond offering from big banks looking to finance the old way of doing business.
7 best socially responsible funds:
— 1919 Socially Responsive Balanced Fund (SSIAX)
— iShares ESG Aware MSCI USA ETF (ESGU)
— Parnassus Core Equity Fund Investor Shares (PRBLX)
— iShares Global Clean Energy ETF (ICLN)
— Vanguard FTSE Social Index Fund Admiral Shares (VFTAX)
— WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE)
— TIAA-CREF Core Impact Bond Fund (TSBIX)
More from U.S. News
9 of the Best Green Stocks to Buy Now
7 Top Gene-Editing Stocks to Buy
7 Best Stagflation Stocks to Buy
7 Best Socially Responsible Funds originally appeared on usnews.com
Update 06/16/22: This story was published at an earlier date and has been updated with new information.
