Impact Investing 101: 15 Socially Responsible ETFs To Help You Get Started
When Purpose Meets Profit
With the emerging impact investing movement advocating a “purpose and profit” ideology, it’s never been easier to align your finances with the social causes that you’re passionate about. By choosing to invest in socially responsible businesses that are making a difference in the world and generating a positive social impact, anyone can be a changemaker and advocate for the businesses paving the way by doing good.
Exchange-traded funds, or ETFs, are perfect for beginners looking to dip their toes into the waters of impact investing – they not only have lower starting fees, but also tend to be more category-specific, so you can invest in funds that track companies focused just on clean water initiatives or renewable energy, for example. For starters, The Good Trade has found 15 socially conscious ETFs for budding impact investors to take an active role in funding the “greater good.”
Also feel free to check out our list of 7 Socially Responsible Investment Platforms That Help You Invest In Both Purpose & Profit
Environmental, Social, Governance (ESG)
DSI (Large Blend)
iShares MSCI KLD 400 Social ETF
If you’re looking for a foundational blend of large, stable stocks, the DSI ETF is a perfect starting point. Topping the list as the largest socially responsible fund (and arguably the most well-known), this ETF casts a wide net: it includes 407 conscious, ESG-friendly companies across the US, such as Microsoft and Coca-Cola, with most funds invested into the technology and healthcare sectors.
ESG (Large Blend)
FlexShares STOXX US ESG Impact Index Fund
This large blend ETF invests in US-based companies that operate responsibly following environmental, social and governance factors, specifically excluding companies in the tobacco, firearms, alcohol, gambling, military weapons, and nuclear power industries. As one of the largest socially conscious funds, ESG’s three year performance was competitive with that of the S&P 500’s.
SUSA (Large Blend)
iShares MSCI USA ESG Select ETF
Like the ESG fund, SUSA includes a range of 100+ socially responsible companies based in the US. This fund is one of the older impact portfolios, having started in 2005, meaning nascent investors can do a little digging into the history of this ETF (showing approximately 14 percent returns in the past five years!). The fund includes companies such as Apple, Alphabet, Kellogg and Accenture.
FIW (Mid Growth)
First Trust Water ETF
If you’re the outdoorsy kind and exploring national parks is your thing, you’ll likely love FIW, which is all about investing in responsible US companies in the potable water and wastewater industry, AKA keeping our lakes and rivers crystal clean. This ETF’s got all bases covered, including companies working in ethical water distribution, purification, filtration, infrastructure and ancillary services such as consulting, construction, and metering.
CGW (Mid Blend)
Guggenheim S&P Global Water Index ETF
For investors with a heart to improve water conditions around the world, the CGW ETF closely tracks the S&P Global Water Index, which encompasses a range of 50 water-related companies focused primarily in the US, Europe, and Asia. This fund has been around since 2007, and is generally considered a low-risk portfolio.
PHO (Mid Growth)
PowerShares Water Resources Portfolio
Meanwhile, the PHO ETF is designed to track an index that’s comprised of US-based companies that create products designed to conserve and purify water for homes, businesses and industries. This fund includes companies such as Waters, Ecolab, and Roper Technologies, tech companies engineering water solutions to make the world cleaner, safer, and healthier for the life science applications or global markets.
MPCT (Large Growth)
iShares MSCI Global Impact ETF
This large growth fund tracks an index composed of positive impact companies around the world that get their revenue by addressing at least one of the United Nations Sustainable Development Goals to “end poverty, protect the planet, and ensure prosperity for all.” Some of the top companies in the MPCT fund include Tesla, P&G, and Gilead Sciences.
NUEM (Large Blend)
NuShares ESG Emerging Markets Equity ETF
For worldly investors glancing overseas, the NUEM ETF tracks a diverse range of socially conscious companies specifically in the emerging Asia and Latin American markets. Sprouting up recently in June 2017, this ETF is still green and “perfecto” for early adopters ready to jump on the emerging markets wagon.
NUDM (Large Blend)
NuShares ESG International Developed Markets Equity ETF
NUDM also just launched June 2017, and is perfect for the global investor for some portfolio diversity out of the US and Canada. The brand new ETF focuses on developed markets like Japan, Germany, and Mexico, and is helmed by 225 international companies following “good” economic, social, governance principles. Nestlé, Banco Santander, and Unilever are all leaders in NUDM.
Clean Energy & Sustainability
CRBN (Large Blend)
iShares MSCI ACQI Low Carbon Target ETF
For impact investors looking to reduce their “financial” carbon footprint, the CRBN ETF tracks a global index that invests in leading companies that are taking steps to reduce their carbon exposure. Though this isn’t an explicit clean energy fund, these companies, such as Apple and Johnson & Johnson, have a “green bias” measured by lower greenhouse gas and carbon emissions.
SPYX (Large Blend)
SPDR S&P 500 Fossil Fuel Reserves Free ETF
On the hunt for an eco-friendly alternative to the markets’ leading S&P 500? SPYX gives you the best of both worlds, mimicking the bullish growth of S&P 500 all the while subtracting the companies that hold fossil fuel reserves such as crude oil, natural gas, and thermal coal.
PZD (Mid Growth)
PowerShares Cleantech Portfolio
PZD invests in a range of cleantech innovators in the developed world, working in a variety of industries including alternative energy, energy efficiency, and environmentally-friendly agriculture and nutrition. Having launched in 2006, this portfolio has a longer investment history for cautious investors wanting to see some traction.
Other Causes: Female Empowerment, Social Impact, Organic
SHE (Large Blend)
SPDR SSGA Gender Diversity Index ETF
This “girlboss” investment fund is all about female empowerment and companies that are intentionally advancing women through gender diversity in the highest levels of senior management and on their board of directors. With 186 companies represented – including Mastercard, Starbucks, and 3M – the aptly-named SHE fund selectively follows companies that are all about girl power.
ICAN (Large Growth)
SerenityShares Impact ETF
Composed of about 103 companies, the “I can” ETF tracks US-based companies with thoughtful missions to address the needs of society and the planet, from community building to granting loans to microenterprises. Disney is represented in this fund – making it a dream come true.
ORG (Mid Growth)
Eponymously known as the “organic” ETF, this investment fund is simple and straightforward, tracking all-natural companies providing organic products from the grocery to the beauty aisle. Sourced from all over the world, two of the top holdings in ORG include L’Occitane and Sprouts.
Alice is a California-grown writer thinking on the things shaping urban living, the modern woman, and living a conscious life of impact in light of a bigger world. A graduate of Northwestern University’s j-school, she spent time abroad working with a microfinance project in Peru before transitioning into a 9-5 in the global development sector. When she’s not daydreaming about opening a social impact coffee shop, you can find her traveling, plié-ing at the barre studio, or curled up with a good book. Follow her latest creative endeavors and musings on Instagram at @alice.zhng.