7 Socially Responsible ETFs to Buy in 2018

These ESG ETFs and issue-based funds let you put money behind your principles

By Jeff Reeves

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Socially responsible investing has come into the forefront over the last few years. From shareholders demanding equal representation for women on corporate boards to recent backlash regarding gun sales policies at retailers like Walmart Inc (NYSE:WMT) and Dicks Sporting Goods Inc (NYSE:DKS), there are many examples.

But ESG investing, or a focus on environmental and social governance standards, can sometimes be daunting. How do you dig into the relevant corporate documents? And when you find the companies that you want to invest in, how can you be sure you’re doing so in a diversified way that doesn’t complicate your retirement strategy?

Thankfully, socially responsible exchange-traded funds are here to help. A host of funds out there offer investors a way to put their money behind their principles without added hassle.

If socially responsible investing is important to you, take note of these seven top ETFs as options for your money in 2018.

 Socially Responsible ETFs: KLD 400 Social ETF

The iShares MSCI KLD 400 Social ETF (NYSEARCA:DSI) is a broad-based fund that tracks 400 U.S.-based companies that, according to iShares, “have been screened for positive environmental, social, and governance characteristics.” One prime example is that the fund excludes corporations involved in weapons, tobacco and alcohol.

Think of it as a modified version of the Standard & Poor’s 500 index, with top holdings including typical megacap companies like Microsoft Corporation (NASDAQ:MSFT), Verizon Communications Inc. (NYSE:VZ) and Procter & Gamble Co (NYSE:PG) among others. If you want to stick with a typical blue-chip stocks index but give a nod towards socially responsible investing, then this is a great place to start.

Socially Responsible ETFs: ESG Select ETF

The iShares MSCI USA ESG Select ETF (NYSEARCA:SUSA) is a more selective version of the previous exchange-traded fund, with only 100 names in the portfolio based on companies with the very best “ESG” ratings for environmental, social and governance factors.

The result is a list that is a bit less diversified, but one that is weighted based on the conduct of a company instead of its size. For instance, Ecolab Inc. (NYSE:ECL) is a company that focuses on fighting disease in hospitals and food processing facilities, among other things.

This $38 billion company ranks around No. 170 in the list of S&P 500 constituents based on market capitalization alone, but makes the Top 5 of this SUSA fund based on how ethically it operates and its impact on society.

Socially Responsible ETFs: Gender Diversity Index ETF

The SPDR SSGA Gender Diversity Index ETF (NYSEARCA:SHE) received a lot of attention in 2017 thanks in part to its role in the placement of the famous “Fearless Girl” statue on Wall Street that depicts a pony-tailed youngster staring down the iconic charging bull statue just a few feet away. In a nutshell, this is a fund that requires all constituents have more female leadership than their peers.

There are a few companies where women are the chief executives, but, to be clear, this doesn’t mean women are in charge of every pick. Top holding Pfizer Inc. (NYSE:PFE), for instance, has a male CEO and only four of 13 top positions are held by women. But since that’s much higher than most of its peers in the pharmaceutical industry, it makes the cut based on SHE methodology.

Socially Responsible ETFs: Clean Edge Green Energy Index Fund

If you care enough about the environment that you want to invest in up-and-coming clean energy companies, the First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN) allows a one-stop destination. Unlike some funds that are dedicated specifically to wind or solar, this broad fund spans all manner of companies that are looking to fight carbon emissions.

That includes solar energy icon First Solar, Inc. (NASDAQ:FSLR) but also electric vehicle powerhouse Tesla Inc (NASDAQ:TSLA) and low-energy lighting solutions company Cree, Inc. (NASDAQ:CREE) to name a few.

It’s a diversified mixed bag of stocks, but the one thing they all share is a commitment to clean energy solutions in some way.

Socially Responsible ETFs: Low Carbon Target ETF

Of course, many alternative energy companies can be smaller and more speculative companies. What if you’d rather invest in big companies that simply do the best they can to protect the planet even if they have nothing to do with solar energy or electric cars?

That’s where the SPDR MSCI ACWI Low Carbon Target ETF (NYSEARCA:LOWC) comes in. Instead of investing directly in clean energy, you’re instead investing in companies that make a concerted effort to save energy and reduce carbon emissions in their regular operations.

That allows companies like Facebook Inc (NASDAQ:FB) to make the cut in this ETF, even though they don’t directly profit from alternative energy. Simply operating in a sustainable way, such installing nine acres of grass and trees on the roof of its Menlo Park campus, is enough.

Socially Responsible ETFs: Inspire Global Hope ETF

“Socially responsible” is a blanket term, and there are many ways to slice up the market based on what you think is right and wrong. One prime example of this is the Inspire Global Hope ETF (NYSEARCA:BLES), which considers “Biblically responsible” investing when picking its portfolio.

That means omitting companies associated with abortion, gambling and other activities that many Christians are likely to feel uncomfortable with.

Top holdings include homebuilder D.R. Horton (NYSE:DHI) but also a hefty portion of U.S. currency as well. It’s a pretty small fund, however.

Socially Responsible ETFs: Workplace Equality Portfolio

Yet another unique play on investing in support of your values is the Workplace Equality Portfolio (NYSEARCA:EQLT), which “consists of publicly traded companies that support lesbian, gay, bisexual and transgender equality in the workplace.”

A number of big companies make the cut here, including semiconductor giant Qualcomm, Inc. (NASDAQ:QCOM) and Victoria’s Secret parent L Brands Inc (NYSE:LB), so the list of 250 constituents covers a pretty wide swath of the market. If you care about LGBT rights, this is a decent way to put your cash behind your values without sacrificing exposure to popular large cap companies.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at [email protected] or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/03/7-socially-responsible-etfs-to-buy/.

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