Socially responsible investing (SRI), also known as environmental, social and governance (ESG) investing, reviews companies that consider both their profits and their responsibilities to the wider world. It is a growing market for investors, with total assets reaching $30 trillion as of 2022.
We launched our first SRI portfolio in 2017 and have since expanded to a lineup of three options.
- wide influence
- social impact
- Climate impact
All three are globally diversified, low-cost, and built to help you align your investments with your values. So before we tackle a frequently asked question about the SRI category in general: performance, let's explore some ways to do so.
How our social impact portfolio lifts up underserved groups
Building on the foundations of the Broad Impact portfolio, Social Impact is adding three funds focused on helping underserved groups reach a level playing field.
$SHE and $NACP, which judge U.S. companies that demonstrate a commitment to gender equality and racial equity, respectively. Next up is $VETZ, a recent addition to the portfolio.
$VETZ is the first of its kind, a publicly traded ETF that invests primarily in loans to active and retired U.S. military personnel and survivors of fallen veterans. These types of mortgages and small business loans have historically helped diversify portfolios and can also help reduce borrowing costs for veterans and their families.
Also, unlike $SHE and $NACP, which are comprised of stocks, $VETZ is an all-bond fund. Therefore, even if you have a low risk appetite when investing, an SRI portfolio can maintain exposure to socially responsible ETFs.
How $VOTE Funds Shake Up Shareholder Activities
Remember the “G” in ESG? This refers to governance, or how a company conducts business. Do they open their books when required? Is their leadership diverse? Are they accountable to shareholders?
On the final front, we have the $VOTE ETF included in each of our SRI portfolios. On the surface, it looks like a garden-variety index fund that tracks the S&P 500, but behind the scenes it works to actively drive companies toward environmental and social practices.
This is done through 'proxy' voting, meaning voting on behalf of people who support the fund. Engine No. 1, the investment firm that manages $VOTE, uses these proxy votes at companies' annual shareholder meetings, where individual shareholders or funds representing shareholders vote on decisions such as board members and corporate goals. I am.
In 2021, Engine No. 1 surprised the corporate world by convincing a majority of ExxonMobile's shareholders to vote for three new board members in the name of reducing the company's carbon footprint. And it did all this despite owning just 0.02% of the company's stock itself. Not a bad return on investment, right?
Does SRI sacrifice profits in the name of good?
We are performing right now, making eye contact with the elephant in the room. It's common to worry about returns, regardless of your portfolio, so it's natural to wonder how socially responsible investing in general is worth compared to alternative investments.
Well, the evidence shows that SRI is very good. According to a study of 1,141 peer-reviewed articles and other similar meta-reviews:
The performance of SRI funds is “on average indistinguishable from traditional investments.”
While the researchers note that “these proposals are likely to evolve,” SRI funds may offer “downside” protection during social or economic crises such as pandemics. We also found evidence that.
In other words, your socially responsible investing is not charity.
Simplify the area of social responsibility
Not so long ago, SRI was barely on the radar of everyday investors. If you're serious, you probably only have two options.
- DIY research and purchase of SRI individual stocks
- Pay a premium and buy into one of the few funds in existence at the time
Those days are thankfully gone, as our portfolio makes it easy to express your values through your investments. Our team of investment experts also regularly seeks out new funds, such as $VETZ and the latest SRI standards, to help our clients achieve their goals while making a bigger impact.
If you want to learn more, check out the full methodology. If you're ready to invest in a better world, we're here to help.
