Investment Opportunities

5 Socially Responsible Funds to Be Grateful For

2020 has been a spectacle. I think that’s the nicest way to put it.

Sometimes it’s been hard to look away.

But before we eagerly turn the page to a new chapter, there are a few more holidays to hit.

Including my personal favorite: Thanksgiving.

It’s not just the stuffing, sweet potatoes, green bean casserole, gravy and pumpkin pie that put me in a good mood. It’s the aura of gratitude.

We’re living in highly contentious and volatile times. So it’s nice to dedicate at least one day of the year to kindness, compassion and thankfulness.

And, of course, giving.

There are many ways to give back, like volunteering, donating, fundraising, and educating yourself and others. But another philanthropic – and profitable – outlet can be through investing, if you know where to look.

Do Good to Do Well

The obvious intention when you invest or trade is to make a profit. But those returns don’t have to cost your soul.

You may have heard of “socially responsible investing” or “sustainable, responsible and impact” investing. It’s also called “environmental, social and governance” (ESG) investing.

This is when you support companies and funds that actively make the world a brighter, better and cleaner place.

These companies are largely value-driven and strive to follow ethical business practices.

This could be through reducing their carbon footprint, adopting sustainable energy practices, paying their employees a real living wage, providing a clean and safe workspace, supporting women and minorities… The list is endless.

In short, this is how you can show companies that doing good in the world will do good things for their bottom line…

As well as boost your portfolio.

Asset management firm Arabesque Partners reported that 80% of the studies it reviewed showed that sustainability practices had a positive impact on investment performance.

Additionally, more than 70% of S&P 500 companies report on sustainability due to growing interest from investors.

Several studies have shown that socially responsible funds either match or outperform traditional funds.

And the cycle is feeding itself…

As more socially conscious investors turn to impact investing, returns from these companies follow, which entices more smart money to jump on board.

This trend has continued in 2020, despite economic hardships.

In the second quarter, the U.S. saw $10.4 billion go into sustainable funds. This brought the total for only the first half of the year to just below the record set for all of 2019. And that annual haul was already four times more than 2018’s total.

So clearly the interest in sustainable funds is growing at a monstrous pace. And a number of them have had quite a lot to show for it this year…

5 Funds to Be Grateful For

Chart 5 ESG Funds

1. First up is the Global X Conscious Companies ETF (Nasdaq: KRMA), slightly outpacing the S&P 500 with a 10.8% gain in 2020.

The exchange-traded fund (ETF) tracks the Concinnity Conscious Companies Index, an equal-weighted index of about 100 U.S. large caps that operate sustainably and responsibly.

Some of its holdings include FedEx Corp. (NYSE: FDX), United Parcel Service (NYSE: UPS), Square (NYSE: SQ) and Nike (NYSE: NKE).

These companies are held to a high standard and are charged with upholding ESG characteristics. Because you know what they say… KRMA’s a b****.

2. After that, we have the iShares MSCI KLD 400 Social ETF (NYSE: DSI). This is a broadly focused fund that covers large cap, midcap and small cap U.S. companies with high ESG scores.

It’s heavily weighted in the technology sector, with Microsoft (Nasdaq: MSFT) representing 9.6% of its total assets. Its top 10 holdings include Tesla (Nasdaq: TSLA), Procter & Gamble (NYSE: PG) and Nvidia Corp. (Nasdaq: NVDA), among others.

The fund is up 11.9% year to date.

3. Next, let’s look at the iShares MSCI USA ESG Select ETF (NYSE: SUSA). This fund is very similar to the iShares MSCI KLD 400 Social ETF but has fewer holdings. It’s also less weighted in tech and financials and more heavily weighted in industrials and healthcare.

Its top three holdings are Microsoft, Apple (Nasdaq: AAPL) and Salesforce (NYSE: CRM).

The fund has increased 15.6% since January.

4. Climbing even higher is the US Vegan Climate ETF (NYSE: VEGN), up 17.4% in 2020.

This fund tracks the Beyond Investing US Vegan Climate Index, which screens out companies involved in military and defense, excessive waste, fossil fuels, human rights violations, animal testing, animal suffering, and other non-ESG criteria.

Don’t let the name confuse you, though. Beyond Meat (Nasdaq: BYND) isn’t one of its top 25 holdings.

5. Lastly, the clear outperformer on this list is the ALPS Clean Energy ETF (CBOE: ACES), up a whopping 80.3% this year.

This ETF is all clean energy all the time. It’s most heavily weighted in renewable energy and electric utilities but is limited to U.S. and Canadian companies.

Some big names in its top 10 include Plug Power (Nasdaq: PLUG), Sunrun (Nasdaq: RUN), Enphase Energy (Nasdaq: ENPH), Cree (Nasdaq: CREE) and NextEra Energy (NYSE: NEE). It has only 36 holdings.

Give Thanks

This Thanksgiving, remember that there are many people working to make our world a more clean, equitable and honorable place.

And if you profit off their backs, more power to you.

That’s how investors can have their vegan cake and eat it too.

Good (and responsible) investing,

Rebecca


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