The markets have been extremely volatile lately owing to a multitude of factors including rate hikes fears and risks of a potential trade war. One particular segment of the market, which has been attracting investor attention over the last few years, is the socially responsible investing segment. These ETFs allow you to invest in line with your principles and contribute to making the world a better place in your own small way (read:
ETFs to be Impacted by Potential Trade War With China).
Investing in separate stocks that you feel are commensurate with your principles can be difficult, while also maintaining a diversified portfolio. Here, ETFs come to the rescue, as they offer a diversified portfolio of stocks focusing on particular screens for environmental, social or governance (ESG) related issues.
Gender equality has been the top trend in 2017 and 2018 so far. With increased focus on disparities in the pay of men and women, investing in companies that have a better standing with regards to gender equity has been gaining popularity. For instance, HSBC
revealed a 59% gender pay gap, even though HSBC’s UK workforce comprises 54% women. Moreover, a mere 23% occupy senior roles at the bank.
Another area attracting investor attention is clean energy. After President Donald Trump decided to leave the Paris Climate Accord last year, multiple critics have argued the need to shift toward cleaner energy and reduce fossil fuel consumption. There are multiple ways to gain exposure to this principle, either by investing directly in funds having a portfolio of stocks involved in clean energy, or by investing in funds having a portfolio of stocks trying to save energy and reduce carbon emissions in their day-to- day operations.
The latest trend among sustainable investing enthusiasts is the need to steer clear of weapons companies. After the school shooting at Stoneman Douglas High School in February and the incident in Las Vegas music festival in 2017, arguments for gun laws and imposing stricter rules regarding gun sales have panned up. Therefore, funds that refrain from investing in companies involved in weapons have caught investor attention.
In the current scenario, we believe it is prudent to discuss the following ETFs that focus on providing exposure to sustainable investing themes.
iShares MSCI KLD 400 Social ETF DSI
This ETF offers exposure to stocks that exhibit positive ESG characteristics, refraining from investing in companies involved in weapons, tobacco or alcohol. This fund has AUM of $1.0 billion and charges a fee of 50 basis points a year. From a sector look, Information Technology, Health Care and Consumer Discretionary have the highest exposure to the fund, with 33.2%, 12.3% and 11.7% allocation, respectively. The fund has 6.0% exposure to Microsoft Corp
MSFT, 3.6% to Facebook Inc FB and 3.0% to Alphabet Inc Class A GOOGL. The fund has returned 17.0% in a year and 2.7% year to date. SPDR SSGA Gender Diversity Index ETF SHE
This ETF offers exposure to companies that have a better structure in terms of women occupying senior roles when compared to its peers. This fund has AUM of $317.3 million and charges a fee of 20 basis points a year. From a sector look, Information Technology, Health Care and Consumer Staples have the highest exposure to the fund, with 22.3%, 16.7% and 13.1% allocation, respectively. The fund has 5.7% exposure to Pfizer Inc.
PFE, 4.9% to Coca-Cola Company ( KO Quick Quote KO - Free Report) and 4.5% to Mastercard Incorporated Class A MA. The fund has returned 11.0% in a year and 1.2% year to date. First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN
This fund is one of the most popular bets on the clean energy segment. It has AUM of $95.9 million and charges a fee of 60 basis points a year. From a sector look, Semiconductors, Renewable Energy Equipment and Electrical Components & Equipment have the highest exposure to the fund, with 28.7%, 15.1% and 13.6% allocation, respectively. The fund has 8.4% exposure to ON Semiconductor Corporation
ON, 7.6% to Albemarle Corporation ALB and 7.2% to Tesla Inc TSLA. The fund has returned 22.9% in a year and 0.6% year to date. SPDR MSCI ACWI Low Carbon Target ETF LOWC
This fund bets on the companies trying to save energy and reduce carbon emissions in their operations. It has AUM of $154.7 million and charges a fee of 20 basis points a year. From a sector look, Financials, Information Technology and Industrials have the highest exposure to the fund, with 20.0%, 19.2% and 12.8% allocation, respectively. The fund has 2.0% exposure to Apple Inc
AAPL, 1.5% to Microsoft Corp and 1.4% to Amazon.com Inc AMZN. The fund has returned 15.7% in a year and 1.2% year to date. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>