3 Environmentally Focused Funds for Earth Day

April 22, 2014

globeSustainable, responsible investing (SRI) considers a company’s environmental, social and social governance. But some SRI funds focus more on governance, and others focus more on the environment. For Earth Day, we’ve highlighted a few of the SRI funds in NoLoad FundX that take an environmentally friendly investment approach (this post does not constitute a recommendation, however).

Diversified Environmentally Focused Fund

Portfolio 21 (PORTX)  – Portfolio 21 (PORTX) takes a rigorous approach to environmental investing. It doesn’t just seek companies that aim to help preserve and protect the environment, it expects companies to be able to respond to ecological limitations and deal with energy, emissions and waste more efficiently. While many SRI funds avoid tobacco, weapons and gambling companies because of their social impacts, PORTX also screens out companies involved in fossil fuels, agricultural biotechnology, nuclear energy, and metals and mining for ecological reasons.

The fund can invest globally, and as of March 31, 2014, PORTX’s portfolio was nearly split between U.S. and foreign companies (mostly developed markets, but some exposure to emerging markets). PORTX gained 12.9% for the 12-months ending April 15, 2014.

Aggressive Environmentally Focused Fund

PowerShares WilderHill Clean Energy (PBW) – One of the leading SRI sector funds is PBW, an ETF that invests solely on companies involved in green or renewable energy. The ETF invests in solar and wind energy companies and even the electric car company Tesla. Because funds like PBW that focus on one area of the market can be very volatile, we suggest taking smaller positions and using these funds in conjunction with a portfolio of core, diversified funds.

PBW returned 57.9% for the 12 months ending April 15, 2014, which compares favorably with SPDR Energy (XLE) an ETF that invests in traditional energy companies and gained just 23.8% over the same time period. But PBW hasn’t been as strong recently: it lost 12.6% for the month ending April 15, while XLE gained 5.7%.

Conservative Environmentally Focused Fund

Pax World Balanced (PAXWX) – A balanced fund like PAX World Balanced is typically less volatile than those that are fully invested in equities. Incepted in 1971, PAX World Balanced was one of the first SRI funds available, and the firm has a very detailed SRI approach that tackles core ESG issues, such as climate change, workplace safety and executive compensation.

The fund can invest globally, but its portfolio is currently focused on U.S. stocks, particularly financials like American Express, which the fund touts for managing its energy consumption and its increased use of renewable energy. PAXWX’s fixed income positions also are eco-focused. It holds “green bonds” like those from Bank of America and the World Bank, which are used to fund eco-friendly projects and investments. PAXWX gained 12.4% for the 12 months ending April 15, 2014.

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