Socially Responsible Investing is Not a Simple Choice

By Rick Kahler via

Socially responsible investing is not as simple as putting your money into an SRI fund or ESG (environmental, social and governance) fund.

There are too many variables.

First, with so many ESG funds available, there is no universal definition. Each one has its own set of criteria. “Just because the fund has ‘ESG’ in the title, it doesn’t mean it meets your definition of ESG,” says Jonathan Kvasnik, Cherokee Investments, quoted in a June 18, 2018, article by Robert Powell in USA Today“ESG funds: What you need to know about socially responsible investing.” It’s important to become very clear about your personal views on social issues, environmental policy, and corporate governance before shopping for a fund.

Another factor to consider is your responsibility to your own well-being. Does owning ESG funds help or hurt an investor’s bottom line? That all depends. While some ESG funds do a little better than owning an index fund, in my experience most do a little worse. One of the biggest problems is that most ESG funds have much higher fees than their passive counterparts. Vanguard notes the average cost of an ESG fund is 1.06%.

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