How to Easily Invest Sustainably & Responsibly

June 11, 2015

bigstock-Father-and-Daughter-Playing-To-62310899Many investors are turning to sustainable responsible investing (also known as socially responsible investing or ethical investing). A Morgan Stanley report found that 71% of investors are interested in sustainable investing.

For many investors, SRI is a way to align their portfolios with their principles. These investors want to grow their portfolios, but they also want their investments to have a positive impact. Others believe that sustainable companies have a competitive advantage. For instance, companies with good workplaces are able to attract and retain better employees and possibly achieve higher productivity and profitability.

Companies that have strong environmental policies may be better able to comply with increasingly strict regulations. They may also be more profitable: a 2014 study found that S&P 500 companies with sustainability strategies were outperforming the other companies on the index.

SRI Funds are an Effective & Practical Way to Invest Sustainably

So, if you want to invest for “good,” how should you go about it?  The reality is, most investors don’t have the time or expertise to truly evaluate a company’s record on environmental, social and corporate governance issues.  And few have the time to build and manage a diverse portfolio of sustainable companies.

That’s where sustainable responsible investing mutual funds, or SRI funds, come in. These funds aim to generate competitive returns while making a positive societal impact. Many invest in companies that meet solid environmental, social and/or corporate governance (ESG) criteria. A variety of funds now seek to address a wide range of issues from executive compensation to deforestation to diversity on corporate boards.

SRI funds are an efficient and practical way to invest sustainably.  

These funds give investors access to experienced SRI fund managers and their research teams. What’s more, the best SRI fund companies not only invest in companies they support but they also advocate for positive change in corporate behavior. Funds allow investors to own a portfolio of sustainable companies in one fund purchase.

Many SRI funds have a long history.

The first SRI fund began in the 1970s. But SRI funds have grown tremendously in the last decade. In 2005, there were around 200 SRI funds, but by 2014 there were more than 900, according to the Forum for Sustainable Responsible Investment (US SIF). Today many of the largest fund companies like Vanguard and iShares offer SRI funds.

SRI funds cover many areas of the market and the globe.

You can invest in domestic SRI funds and foreign SRI funds. You can invest in SRI ETFs and funds that track SRI indexes or actively managed SRI funds. You can find sector SRI funds and SRI funds that are diversified across many different sectors or regions.

As with any fund investing, the challenge is deciding which funds to own now and when to move your portfolio to different funds. A solid investment approach can help. My Upgrading strategy leads me to invest in SRI funds with strong recent returns. I hold these funds as long as they continue to bring in good returns and I sell them when better performers emerge.

This post by FundX President Janet Brown originally appeared on Forbes.

Print Friendly, PDF & Email

Previous post:

Next post: