The world is changing. People want to see their investments as having a positive impact on the world.
A recent study by the financial services firm, Greenwich Associates, found that approximately 75% of Millennials are willing to sacrifice potential returns on their investments in order to have a positive societal impact. This has led to the emergence of socially responsible investing (SRI).
These days, you no longer need to look for individual stocks or even mutual funds to get your SRI fix. Instead, you can focus on a specific type of exchange-traded fund (ETF) known as a Socially Responsible ETF—or an SRC ETF for short.
These funds offer investors the opportunity to own a basket of stocks and/or other securities related to companies that support causes such as environmentalism, human rights, and fair labor practices.
Read on to learn more about socially responsible ETFs and what to consider before investing.
What Is a Socially Responsible ETF?
A socially responsible ETF is an exchange-traded fund (ETF) that invests in stocks and/or other securities related to companies that support causes such as environmentalism, human rights, and fair labor practices.
Socially Responsible ETFs are designed to give investors the opportunity to invest in companies that make positive social and environmental changes while still providing a return that is competitive with other types of ETFs.
Investors who want to see their investments have a positive social impact can choose from a range of socially responsible ETFs that specialize in different sectors and industries, including renewable energy, sustainability, healthcare, and financial services.
All of these ETFs make efforts to invest in companies that positively impact society while also providing a return on investment that is competitive with other ETFs.
How To Find Socially Responsible ETFs To Invest In?
If you decide that a socially responsible ETF is right for you and your investment portfolio, you will need to identify which one makes the most sense for your investment goals.
Start by looking for companies making a positive impact in the areas that interest you most, such as the environment, human rights, and fair labor practices. To find these companies, you can use various online tools such as Google, Yahoo! Finance, and Bloomberg. You can also use online stock screening tools to filter for stocks you think are making a positive impact.
Secondly, try and find out whether the fund has been successful historically. After all, the whole point of investing is to make a profit to expand your portfolio. The only difference is that socially responsible investing puts your money into the good of society and the environment.
Remember to look at the fund’s management team, holdings, and expense ratio. This ratio shows how much of your investment goes towards operating and administrative costs, which you will want to keep a close eye on.
Make sure you understand what types of companies the fund invests in and how much of the fund is dedicated to socially responsible companies. Remember that all funds will have different strategies and methodologies, so you should choose one that best suits your investment needs.
The Bottom Line
As you can see, there are a few things to keep in mind when selecting a socially responsible ETF for investors looking for surety in their investment decisions. And investing in a socially responsible ETF is a good way of earning higher returns on your investments than other types of ETFs.
While there is no guarantee that this will happen, studies have shown that socially responsible ETFs tend to outperform traditional ETFs. Consider the tips above to find good, socially responsible ETFs worth your money.