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Sustainable Investing: What Is It and Why Is It Hot Now?

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  • (0:40) - Sustainable and Socially Conscious Investing
  • (6:35) - ETHO: Fund Overview
  • (8:50) - Fossil Free Investing Trend
  • (11:20) - How does ETHO Find the Climate Leaders?
  • (14:45) - How Are Stocks Chosen For ETHO?
  • (17:50) - How Can ETHO Fit Into An Investor’s Portfolio?
  • (21:40) - Episode Roundup:

One of the quickest growing areas of the ETF market today is the socially conscious and sustainable investing space. More and more funds are launching in this segment in order to give investors options that better align with their belief systems, or at least focus on companies trying to be better stewards of the environment.

But what does this push towards sustainable or socially conscious investing mean for the average investor’s portfolio? To find out the answers to this question, and more, I spoke with Conor Platt, the co-founder and CIO of Etho Capital, for the latest edition of the Dutram Report.

Sustainable Investing in Focus

Conor and I discuss the generational differences in focusing on sustainable investing, and what kind of industries this approach includes—or really, what kinds it excludes—from the investing process. We also tackle the topic of fossil-free investing, and why this is catching on among some portfolio manager circles as of late.

We also dive into some of the key trends in the sustainable and socially conscious investing worlds as of late, discussing the key trends here. In particular, we discuss some of the key differences between the approaches, and some other types of sustainable or socially conscious investing methods that often go unnoticed by investors.

The Fund

We also dive a bit deeper into Platt’s fund, the Etho Climate Leadership U.S. ETF (ETHO), which focuses on an index of over 350 companies that have the smallest carbon footprint in their respective industries. Conor also clues us in on the fund’s ‘smart sustainability process’ and what might help to set this fund apart from some of its counterparts in the space such as, for example, DSI, KLD, or CRBN.

Another aspect we discuss is what ETHO is excluding from its portfolio, and how limiting exposure to energy names ends up impacting the portfolio, or what is done about holdings in the basic materials space. This is especially important item to note, as the securities in XLE accounts for roughly 7% of the total exposure in SPY, but almost a rounding error in ETHO. Meanwhile, the materials sector—as represented by XLB—accounts for five percent of SPY, but isn’t exactly thought of as the most sustainable or environmentally-friendly industry out there. We talk through these issues and what ETHO and those focused on sustainable investing might want to consider in this situations from a portfolio perspective.

Bottom Line

Conor and I discuss a wide range of topics on the fossil-free, sustainable, and socially conscious investing trends. We also talk about some of the limitations of this strategy and what investors need to know about this approach for their portfolios in today’s podcast.

But what do you think about the sustainable investing trend? Listen to this edition of the Dutram Report and let us know what you think. Make sure to write us in at podcast @ or find me on twitter @EricDutram to give us your thoughts on this topic or anything else in the ETF market.

But for more news and discussion regarding the world of ETFs, make sure to be on the lookout for the next edition of the Dutram Report, and check out the many other great Zacks podcasts as well!

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