Socially Responsible Investments Shift from Niche to Core ETF Strategy

Socially responsible investing is going mainstream as a number of money managers roll out exchange traded fund strategies that target characteristics described under sound ESG or environmental, social and governance principles.

Socially responsible investing now accounts for about one in every six pooled investing dollars in the U.S., or nearly $6.6 trillion at the start of 2014, reports Jeff Brown for U.S. News. Investment pools that utilize SRI principles, which include ESG investments or simply sustainable investing, expanded to 925 in 2014 from 55 in 1995.

The socially responsible investing theme covers a wide range of investments. For instance, some funds shun the defense or fossil fuel industries while others exclude gun makers, alcohol or tobacco producers, or companies deemed unfriendly to their workers, shareholders or the environment.

Investors can easily access the space through ETF strategies as well.

“ETFs are a valuable tool for helping to improve risk-adjusted returns over the long term, and this characteristic is particularly important for investors focused on socially responsible strategies,” Tom Lydon, president of Global Trends Investments and publisher of ETF Trends, told U.S. News.

The ESG and sustainable investment theme may continue to grow on interest from women and millennials, according to Wells Fargo Private Bank.

“They don’t see their investment portfolios existing in a vacuum, and want them to reflect their view of the world and the future,” Lloyd Kurtz, head of social impact investing at Wells Fargo Private Bank, told U.S. News.