If you’ve decided that you want to put your money into companies that conduct business in accordance with your values, the next step is figuring out which stocks to invest in. So-called impact investing or socially responsible investing has been gaining traction in recent decades as investors increasingly realize that they don’t have to compromise on the issues they care about — be it equality for women, preventing climate change or supporting organic agriculture — in order to earn a profit in the stock market. But, identifying the right individual stocks to invest in can take some financial know-how, not to mention time-consuming legwork.
An alternative impact investing strategy is to put money into socially responsible exchange-traded funds (ETFs). An ETF is an investment fund that holds a group of stocks, bonds or commodities and typically tracks an index. The most well known stock market indices are the S&P 500 and Dow Jones, which both track the performance of large publicly traded companies. But, there are many other indices that track companies in certain segments of the market, say small cap stocks or companies in the semiconductor industry. There are even indices that focus on SRI themes, such as alternative energy or workplace equality. Here are 10 exchange-traded funds that track indices that are likely to appeal to impact investors.
1. Gender Diversity Index ETF (Ticker: SHE)
With the memorable (and apt) ticker “SHE,” this fund tracks large cap U.S. companies that have the highest rankings in their industries for gender diversity in senior leadership positions. Investing in putting more women in the corner office? That’s a no-brainer. Even better, the fund gives a portion of its revenue to charitable organizations working to empower women.
2. Workplace Equality ETF (Ticker: EQLT)
If you want to be sure your investments are supporting companies that treat LGBT employees fairly, then take a look at the Workplace Equality ETF. To be included in the fund, companies must generally offer health benefits to same-sex spouses of employees and include mandatory language in their equal employment opportunity statements prohibiting discrimination based on sexual orientation and gender identity. Top holdings include Marriott and Bank of America.
3. The Organics ETF (Ticker: ORG)
Tracking the Solactive Organics Index, this ETF seeks out companies that are working to meet increasing demand for “naturally-derived food and personal care items,” such as Whole Foods Market and L’Occitane International. Investing in organics is financially prudent as well because, as noted on the fund’s site, demand for organic products has increased tenfold in the past 17 years.
4. Barclays Women in Leadership ETN (Ticker: WIL)
Another investment vehicle to fulfill both your financial and your feminist goals, Barclays Women in Leadership Index seeks out companies with gender-diverse executive leadership and governance. “Women are significantly underrepresented in corporate executive leadership, yet a growing body of third-party research suggests that gender-diverse leadership may correlate with relatively stronger corporate performance, as compared to companies with less gender-diverse leadership,” Barbara Byrne, vice chairman in investment banking for Barclays, said in a statement. “We believe that providing ETNs and indices that enable investors to allocate capital to this theme will provide a market-based approach to help catalyze change.”
5. S&P 500 Fossil Fuel Reserve Free ETF (Ticker: SPYX)
You don’t have to invest in companies you’ve never heard of in order to pursue an impact investing strategy. This fund includes companies from the S&P 500 that don’t own fossil fuel reserves (essentially stockpiles of oil, coal, or other energy sources that have a negative environmental impact). Top holdings include leading corporations like Apple, Microsoft and Amazon.
6. Etho Climate Leadership U.S. ETF (Ticker: ETHO)
If you work hard to reduce your own carbon footprint, then you probably want to invest in companies doing the same. This fund includes more than 350 companies that have the smallest carbon footprints in their industries. LinkedIn and Charter Communications are among the top stock holdings in the fund.
7. PowerShares Cleantech Portfolio ETF (Ticker: PZD)
Here’s a one-stop-shop for exposure to a broad swath of the clean tech industry. The fund seeks companies with the best investment returns, and top holdings include automotive parts supplier BorgWarner and multinational electronics producer Johnson Controls.
8. First Trust Global Wind ETF (Ticker: FAN)
Convinced that wind energy is part of the solution to the challenge of sustainability? Then put your money where you mouth is by investing in this fund that includes wind farms as well as companies that make machinery and materials for the wind energy industry.
9. Barclays Return on Disability ETN (Ticker: RODI)
The underlying index for this investment option ranks companies based on things like hiring people with disabilities and implementing productivity-focused improvements driven by people with disabilities. Investing in companies that support people with disabilities isn’t just the right thing to do, but it also makes good financial sense when you consider that there are 1.3 billion people worldwide who face some sort of challenge related to cognition, dexterity or sensory abilities, according to Barclays.
10. Guggenheim Solar ETF (Ticker: TAN)
Get access to all major segments of the solar industry, including lighting, solar thermal and photovoltaic, by investing in this ETF. Top holdings include First Solar and Trina Solar.
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