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Socially Responsible Investing

Build a portfolio that reflects your values.

Our Two Cents

With Socially Responsible Investing (SRI), you can work towards achieving your financial goals and support causes and issues you care about. Here’s what to look for when aligning your portfolio with your values.

Looking to build a portfolio that reflects your personal beliefs and values? If so, you're not alone. More investors are choosing to go beyond risk and return in selecting investments that support—or avoid—specific companies, industries, or market sectors. 

This type of investing can put your money to work—while making a positive difference in areas like the environment, health, and human rights. So, is socially responsible investing right for you? Here are some things to consider.

What is socially responsible investing (SRI)?

Socially Responsible Investing means selecting investments based on whether or not they align with your beliefs and values, in addition to considering risk and return. SRI includes several types of values-based investing, such as:

  • Environmental, social and governance (ESG) factors
  • Social choice
  • Socially conscious investing
  • Impact investing
  • Sustainable investing

How does SRI work? 

SRI strategies were originally used to generally avoid industries like arms, tobacco, gambling, or alcohol. But today's investors are also using SRI to specifically target investments that support the things they care about, such as:

  • Climate change, clean air and water, and responsible forestry and agriculture 
  • Disadvantaged and under-represented populations
  • Strong employment, community and shareholder practices
  • Transparent operations and accounting 

How do I do build an SRI portfolio?

You can choose to build an SRI portfolio by choosing SRI funds and ETFs, or by picking stocks and bonds based on your specific preferences. 

Some investors choose to add a few or several SRI investments into their existing portfolio. Other investors want their entire portfolio aligned with their SRI preferences. You can determine the level of SRI that is right for you.  

Add SRI funds and investments to your current portfolio.

  • Off-the-shelf mutual funds, exchange-traded funds (ETFs), and managed accounts can offer convenient, low-cost investments that broadly align with your preferences, like low carbon, good governance, and gender diversity. Keep in mind there is not a universal definition or list of requirements for funds to use the SRI label.
  • Thematic funds focus on companies from a single industry involving issues such as air quality, alternative energy, and clean water. 
  • A newer type of thematic fund—called an impact fund—helps investors try and solve global problems by focusing on companies doing work related to clean technologies, racial equity, gender diversity, and other world issues. 

Build your own all-SRI portfolio.

  • Build a complete SRI portfolio security by security. 
  • Screen and compare investments, and choose mutual funds, ETFs, or separately managed accounts that fit your investment goals and your values.
  • Check out an ETF's or mutual fund's prospectus and annual report, which describe details about the fund including the investment objective, investment screening criteria and the management team. To check the investment characteristics of a mutual fund or ETF, you can also check out the fund's web page and look at details including net expense ratio, performance relative to peers and benchmarks, risk measures (such as standard deviation and beta), and assets under management.  

Work with an advisor to build a custom portfolio.

  • Finding SRI investments that align perfectly with your values and goals can be challenging. 
  • Depending on your needs and asset levels, working with an advisor to build a custom portfolio may better suit your situation and goals.

What should I consider before I invest?

As an SRI investor using mutual funds and ETFs, you'll want to make sure the fund and all investments within the fund are managed and selected in a way that aligns with your values. Otherwise, key considerations are the same as with choosing any other fund: 

  • Costs 
  • Performance potential 
  • Risk management 
  • Investment team quality

Are there any trade-offs with SRI ETFs and mutual funds?

When it comes to costs and investment returns, there may be little to no trade-offs. Depending on the time period and sector, many SRI funds have performed about as well as non-SRI funds. And the costs of similar SRI and non-SRI strategies may be about the same. 

Invest to support your goals and your values.

Whether you invest on your own or with the help of an advisor, socially responsible investing lets you build a portfolio that reflects your personal beliefs and values. 

Investors in mutual funds and ETFs should consider carefully information contained in the prospectus or, if available, the summary prospectus, including investment objectives, risks, charges, and expenses. Please read it carefully before investing.  

Socially screened investments exclude certain investments and therefore may not be able to take advantage of the same opportunities or market trends as funds that do not use social screens. 

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The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager.

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