Exchange traded funds (ETFs) could see more of their holdings take on socially responsible business practices. For example, Wal-Mart (WMT), McDonald’s (MCD) and Starbucks (SBUX) recently have started selling fair trade coffee, reports Andrew Downie for The New York Times. "Fair trade" is defined as reflecting "concern for the social, economic and environmental well-being of marginalized small producers" and does "not maximize profit at their expense," according to the International Fair Trade Association.
The iShares Dow Jones U.S. Consumer Services (IYC) is one ETF that holds both Wal-Mart and McDonald’s in its top holdings. Wal-Mart makes up 6.1%, and McDonald’s comprises 3.2%. PowerShares Dynamic Leisure & Entertainment (PEJ) has McDonald’s in its top holdings, and Vanguard Consumer Staples ETF (VDC) has Wal-Mart in its top holdings. Year-to-date, IYC is up 1.7%, PEJ is up 3.2% and VDC is up 10.0%.
These ETFs are not what most investors would consider typical socially-responsible investments. But thanks to the increased demand for fair trade products, they could be considered part of the elite group. Below are a few ETFs that are more commonly associated with socially responsible practices. Their performances year-to-date are:
- iShares KLD Select Social Index (KLD) – up 10.3%
- iShares KLD 400 Social Index (DSI) – up 7.6%
Claymore/KLD Large-Cap Sudan Free Social Index Core (KSF) – down 2.7% for the last three months, having launched in June
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.