Last year we began offering investments in funds that focus on what's referred to as Environmental, Social, and Governance (ESG) factors. Individuals interested in "no harm" or "aware" investing are increasingly seeking to put their investment money in companies that have a corporate mandate to reduce pollution and fossil fuel use, increase diversity on their boards, and other socially conscious commitments. And there are more and more funds that seek to either eliminate certain types of industries (e.g., guns, environmental pollution, fossil fuels, or tobacco) or investment funds that only invest in companies that have a strong commitment to making the world a better place. See our earlier blog posts for more details on what factors are included in ESG funds.
In response to our own feelings about being good global stewards, we have developed a portfolio template of ESG funds as an option to our more standard, traditional passive index fund of investments (such as Vanguard's Total Stock Market or Total Bond Market index funds). Our clients can opt into this ESG focused portfolio. Please let us know what your preferences are.
As we sought to develop our own ESG investment model, we consulted with Morningstar, Inc.'s analyses (https://www.morningstar.com/funds) along with the non-profit database As You Sow to come up with the best options for our clients. We compare funds based on cost, asset allocation, history of investment returns compared to peers, corporate strength, their overall rating as good global citizens, and other factors.
Our ESG fund line up now includes such funds as iShares ESG Aware small-cap (ticker symbol ESML), Vanguard ESG International Stock ETF (VSGX), Vanguard Global ESG select stocks (VEIGX), True Shares active opportunities ETF (ECOZ), Dimensional Fund Advisors real estate mutual funds (DFREX), First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) and Ecofin's Global Water ESG Fund (EBLU). We are very excited about all of these funds and will be describing in them in more detail in future blog posts.
This month's spotlight is on Ecofin Global Water ESG Fund (EBLU). Typically, we allocate 5% of an account balance to this fund. Morningstar gives this its top star rating (5 stars) for an excellent risk adjusted return and a Silver Rating (just under their highest Gold rating) for overall management, fees, and sustainability of the fund. Here's a link to the Morningstar analyst's description of the fund: EBLU Water is an essential asset and companies that manage, treat, and distribute water are critical to economic growth and social stability.This fund invests in water companies in developed markets (such as the US, Canada, and Europe). The Ecofin Global Water ESG Fund uses a passive management approach and seeks investment results that correspond generally to the price and distribution rate performance of the Ecofin Global Water ESG Net Total Return Index℠, which is comprised of companies across the globe and throughout the water cycle that they believe are positioned to benefit from the pursuit of solving the water supply/demand imbalance. For more information, check out this link: Investing in water: Making an impact without sacrificing performance.
is a wonderful website to explore. In order to know if you’re investing sustainably, you have to know what you own. Finding out what retirement plans and mutual funds are investing in is not obvious, but you can get some info on them with a few steps. As You Sow's free online tools can show you exactly what companies are embedded in your funds and which funds are aligned with your values.