Invest In Your Ideals--and Earn Money Back
Get Your Priorities Straight
I once had a client who was the poster child for environmentalism: no makeup or hair dye, an organic vegan, drove a Prius. She would take off from work every year to volunteer for Earth Day, never bought bottled water and always carried a reusable shopping bag with her, just in case. So I was surprised when we were reviewing her portfolio for the first time and I noticed that within her mutual funds she owned stock in some of the most environmentally-damaging chemical, energy and utility companies in the world. She had no idea and was shocked. Neither she nor her former financial advisor had ever thought to check.
It's easy to forget that you have the opportunity to support--even advance--the causes you believe in with your investments (or, inadvertently, support practices you don’t, if you're not careful). Whether you're passionate about the environment, human rights issues, or equal opportunity in the workplace, socially-responsible investing (SRI) offers a simple way to put your money toward the issues you care about. The best part: You can earn money back in the process.
Not sure where to start? We've highlighted two sample funds--one more risky and one less risky--for some of the most common causes, and included details on cost and performance, so you can decide for yourself what’s worth the investment.
If You Want to Help the Environment...
"Clean technology," "green technology," "sustainable" or "alternative energy" funds invest in companies that create energy sources or provide services with a smaller environmental footprint such as wind power, solar power, biomass, hydropower, biofuels, information technology, recycling, clean water and electric motors. Many of these companies have been experiencing growing pains in the past few years, so funds in this category tend to be highly volatile and very risky. Please proceed with extreme caution.
More risky fund: Market Vectors Global Alternative Energy ETF (GEX) - Offers one-trade and relatively low-cost access to the global alternative energy sector. This is good for the earth-conscious investor who wants to support the broader cause (and is comfortable with risk!).
Approximate Price/Share: $15.00
Annual Expense Ratio: 0.62%
1-Year Return: 61.78%
5-Year Return: -21.36%
Less risky fund: Green Century Equity Fund (GCEQX) - This company was founded by nonprofit environmental advocacy organizations and this particular fund excludes investment in owners or operators of nuclear power plants and major electric utility companies. It also aims to invest in companies with strong commitments to quality in manufacturing.
Annual Expense Ratio: 1.16%
1-Year Return: 26.61%
5-Year Return: 6.96%
Minimum Investment: $2500 ($1000 for IRA)
(Risk levels were determined by comparing the historical volatility of the funds. But keep in mind that funds labeled "less risky" might still feel too risky for you, and the top fund here, as well as one later in the article, are exchange-traded funds, ETFs, which have slightly different characteristics than mutual funds. )
If You Want to Empower Women...
Many SRI funds screen companies for their commitment to diversity and/or equal employment opportunity (EEO). In fact, there are 17 mutual fund companies with funds that either seek investments with positive impacts in this area or avoid poor performers. Some companies are taking a more proactive approach through increased shareholder advocacy and scrutiny of business practices relating to women.
More risky fund: PAX World Global Women’s Equality Fund (PXWEX) - Managed by a woman and seeks to invest primarily in large-cap, global companies that are leaders in promoting gender equality and women’s advancement. The fund also performs gender analysis to assess women’s representation on the board and in senior management as well as other indicators of gender leadership.
Annual Expense Ratio: 1.24%
1-Year Return: 18.43%
5-Year Return: -0.09%
Minimum Investment: $1000
Less risky fund: Calvert Social Index Fund (CSXAX) - Calvert has a long history of promoting diversity and women’s empowerment. In fact, their “Women's Principles,” which define a global code of conduct on empowering women, were used as the basis for the UN's Women's Empowerment Principles.
Annual Expense Ratio: 0.75%
Load: 4.75%
1-Year Return: 13.56%
5-Year Return: 2.76%
Minimum Investment: $2000 ($1000 for IRA)
If You’re a Human Rights Activist...
Some funds seek out companies that are dedicated to advancing human rights around the world and have demonstrated extraordinary respect for indigenous peoples and cultures. They also seek to exclude companies whose business practices may have oppressed people or violated human rights.
More risky fund: Domini International Social Equity Fund (DOMIX) - This company’s global funds focus on two objectives: universal human dignity and environmental sustainability.
Annual Expense Ratio: 1.60%
1-Year Return: 31.04%
5-Year Return: -0.31
Minimum Investment: $2500 ($1500 for IRA)
Less risky fund: Appleseed Fund (APPLX) - This company restricts certain companies and includes companies working to improve human rights, healthcare and the environment. Bonus: they allocate at least 1% of portfolio investments to community investing.
Annual Expense Ratio: 1.25%
1-Year Return: 21.11%
5-Year Return: 11.23%
Minimum Investment: $2500
If You’re A Community Servant...
Funds that focus on community investing aim to strengthen low-income communities by providing affordable housing, jobs, small business administration loans and funding for economic development projects. These funds almost exclusively invest in bonds and are therefore less risky and volatile than other more stock-concentrated funds.
More risky fund: Access Capital Community Investment Fund (ACASX) - Their self-proclaimed financial objective is “double bottom line investing,” and investors can even target their investments by geographic location -- that is, if you have at least $500,000 to invest.
Annual Expense Ratio: 0.94%
Load: 3.75%
1-Year Return: -1.29%
5-Year Return: 4.24%
Minimum Investment: $2500
Less risky fund: CRA Qualified Investment Fund (CRATX) - All fund assets support vital community development activities to promote healthy communities and neighborhood revitalization.
Annual Expense Ratio: 0.84%
1-Year Return: -1.74%
5-Year Return: 4.23%
Minimum Investment: $2500
If You Want to Improve the Workplace...
Some funds seek to invest in companies with outstanding workplaces, because they believe that they are usually able to recruit and retain better employees, and outperform their competitors in terms of innovation, productivity, customer loyalty and profitability. Makes sense to us and the returns prove it!
More risky fund: Parnassus Workplace Fund (PARWX) - Picks its stocks from a pool of companies listed on Fortune magazine’s 100 Best Companies to Work For or that have otherwise been identified as good workplaces. Takes environmental, social and governance (ESG) factors into account in making investment decisions, in addition to factors affecting employees.
Annual Expense Ratio: 1.14%
1-Year Return: 29.47%
5-Year Return: 12.83%
Minimum Investment: $2000 ($500 for IRA)
Less risky fund: Neuberger Berman Socially Responsive Fund (NBSRX) - Seeks to invest in companies “whose employment and workplace practices are considered progressive; have positive labor relations and workers compensation rates, low turnover and absenteeism and exceptional workplace safety records.” Additionally, the fund also offers a separate account strategy to accommodate specific labor rights concerns.
Annual Expense Ratio: 0.89%
1-Year Return: 30.60%
5-Year Return: 6.29%
Minimum Investment: $1000
If You’re Pious...
Several SRI fund companies were founded on religious principles and adhere to strict guidelines to exclude certain companies from their investment portfolios due to “sinful” business practices. Even if you’re not religious, with some of these funds’ returns, you might want to consider them anyway.
More risky fund: Ave Maria Rising Dividend Fund (AVEDX) - Seeks investments that do not violate core values and teachings of the Roman Catholic Church. This company takes a “pro-life and pro-family approach to investing, with a proprietary moral screening process that examines corporate compliance with Catholic teaching regarding abortion, pornography, and policies that undermine the sacrament of marriage.”
Annual Expense Ratio: 0.99%
1-Year Return: 26.70%
5-Year Return: 10.30%
Minimum Investment: $1000
Less risky fund: Amana Income Fund (AMANX) - Invests according to Islamic principles, which generally require that investors avoid interest (riba) and companies involved in liquor, pornography, gambling, and banks. The fund avoids bonds and other fixed-income securities, so it might be riskier than other more diversified funds. However, it invests only in dividend-paying companies, which tend to be larger companies and are expected to have more stable stock prices. If you are anti-banks or only have a small amount to invest, this could be a good choice for you.
Annual Expense Ratio: 1.20%
1-Year Return: 22.91%
5-Year Return: 6.86%
Minimum Investment: $250 ($100 for IRA)
If You Want the Best SRI Bang for the Buck...
These funds offer good diversification and an investing strategy that covers most SRI bases for a very reasonable cost.
More risky fund: Vanguard FTSE Social Index Fund (VFTSX) - Seeks to track a benchmark of large- and mid-cap stocks that have been screened for certain social, human rights, and environmental criteria. The largest concentration in the portfolio is financials followed by healthcare.
Annual Expense Ratio: 0.29%
1-Year Return: 31.43%
5-Year Return: 7.15%
Minimum Investment: $3000
Less risky fund: iShares MSCI KLD 400 Social Index ETF (DSI) - Invests in U.S. large-, mid- and small-cap stocks screened for positive environmental, social and governance characteristics. The largest concentration in the portfolio is information technology followed by healthcare.
Approximate Price/Share: $60.00
Annual Expense Ratio: 0.50%
1-Year Return: 27.49%
5-Year Return: 7.57%
For more socially-responsible investing options and other information and resources on SRI, check out the Forum for Sustainable and Responsible Investment.
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