Alternative Investments

5 Socially Responsible Funds to Be Grateful For

2021 has been a year for the record books.

All-time market highs, a global vaccine rollout and the “Great Resignation” trend only scratch the surface of what’s transpired this past year.

But before we 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 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 values-driven and strive to follow ethical business practices.

That could be through reducing their carbon footprints, adopting sustainable energy practices, paying their employees a living wage, providing clean and safe workspaces, 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 Index 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 seen no end in 2021, despite the continuing pandemic.

In the second quarter, the U.S. saw roughly $17.5 billion go into sustainable funds. This was less than the all-time high of nearly $21.5 billion, which was set in the first quarter of 2021. But it’s significantly higher than the same quarter in 2020, which was a record itself.

5 Funds to Be Grateful For

1. First up is the Global X Conscious Companies ETF (Nasdaq: KRMA), slightly outpacing the S&P 500 with a 25.2% gain so far this year.

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.

Its top holdings include the FAANG+M stocks as well as Paycom Software (NYSE: PAYC) and ConocoPhillips (NYSE: COP).

These companies are held to a high standard and are charged with upholding ESG characteristics. Because you know what they say about karma…

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 10.7% of its total assets. Its top 10 holdings include Tesla (Nasdaq: TSLA), Procter & Gamble (NYSE: PG), and Nvidia (Nasdaq: NVDA), among others.

The fund is up about 30% 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.

Some of its top holdings are The Home Depot (NYSE: HD), Texas Instruments (Nasdaq: TXN) and 3M Company (NYSE: MMM).

The fund has increased 27.4% since January.

4. After that, we have the US Vegan Climate ETF (NYSE: VEGN), up 26.6% in 2021.

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. Beyond Meat (Nasdaq: BYND) isn’t one of its top 25 holdings.

5. Lastly, there’s the BlackRock U.S. Carbon Transition Readiness ETF (NYSE: LCTU), which has increased about 16% so far this year.

Terms like climate change and carbon neutrality have been trending in recent months. And that’s largely because the global economy is racing against the clock to reverse the damage done by decades of pumping carbon dioxide into the atmosphere.

The companies tracked in this fund are best positioned to benefit from the transition to a low-carbon economy.

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,


P.S. In the spirit of giving, have you thought about your holiday gifts for this year? Don’t buy anything until you read this…

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