Where to Invest for Good: Top Online Investment Platforms for Socially Responsible Investing - CentZip

Where to Invest for Good: Top Online Investment Platforms for Socially Responsible Investing

Top Online Investment Platforms : As an investor concerned with making a positive impact, you want your money to matter. Socially responsible investing allows you to align your financial decisions with your values. By investing in companies and funds that prioritize environmental, social, and governance factors, you can support causes you care about like renewable energy, healthcare, education, and more.

The good news is several reputable investment platforms now offer socially responsible options so you can grow your wealth and do good at the same time. In this article, we highlight some of the top online investment platforms for socially responsible investing based on fees, account options, investment choices, and impact reporting. By opening an account with one of these platforms, you’ll be well on your way to building a sustainable portfolio that generates both financial and social returns.

What Is Socially Responsible Investing?

Socially responsible investing (SRI) refers to investment strategies that consider both financial returns and social good. SRI investors aim to support companies that act ethically and sustainably. They avoid companies involved in areas like fossil fuels, tobacco, weapons, or human rights abuses.

There are several approaches to SRI. Screening is avoiding “sin stocks” in areas like tobacco, alcohol or gambling. ESG integration considers environmental, social and governance factors when analyzing companies. Impact investing provides capital to solve social or environmental problems. Shareholder advocacy pressures companies to improve policies and transparency.

The SRI market has grown tremendously. According to US SIF, $12 trillion in US-domiciled assets under management used SRI strategies in 2018. For investors concerned with more than just profits, SRI offers a way to support positive change.

Many major investment firms now offer SRI options. Online platforms also make it easy for individuals to invest sustainably. Some recommended options:

•Betterment – Offers portfolios aligned with sustainable values like environmental protection and social justice. Uses ETFs focused on companies with high ESG ratings.

•Wealthsimple – Socially responsible investment portfolios avoid sectors like tobacco, weapons and coal mining. Uses low-fee SRI ETFs. Available for taxable accounts, TFSAs, RRSPs.

•Swell Investing – Impact investment portfolios target companies working to solve global challenges in areas like renewable energy, green transportation and affordable housing.

•OpenInvest – Customizable portfolios aligned with values like environment, diversity and governance. Uses proprietary scoring to select companies making a positive impact.

•Motif – Thematic portfolios focused on trends like clean energy, sustainable agriculture and fair labor practices. Makes it easy to invest in companies driving social and environmental change.

For investors who care about more than just the bottom line, SRI offers an opportunity to support positive change. The many online platforms now available make sustainable investing accessible to all.

Top 5 Online Investment Platforms for SRI

To invest in companies that prioritize social and environmental good, you have several excellent online platforms to choose from. Here are the top 5 options for socially responsible investing (SRI):

1. Betterment

Betterment is a robo-advisor that builds customized portfolios with low-cost ETFs. They offer SRI portfolios that exclude companies involved in firearms, tobacco, and fossil fuels. Fees start at 0.25% of your balance per year.

2. Ellevest

Ellevest is an investment platform built by women, for women. They incorporate environmental, social and governance (ESG) factors into investment decisions and portfolios. Fees range from 0.25% to 0.50% per year.

3. Wealthsimple

Wealthsimple offers halal investment portfolios that adhere to Islamic law by excluding companies related to alcohol, tobacco, weapons, and gambling. They also have SRI portfolios focused on clean energy and tech. Fees start at 0.5% per year.

4. Earthfolio

Earthfolio is an investment platform dedicated to SRI. They build portfolios focused on renewable energy, green tech, and social impact companies. Fees are 0.5% of assets under management per year.

5. Swell Investing

Swell creates themed SRI portfolios focused on areas like renewable energy, disease eradication, and affordable housing. They charge 0.75% of your balance as an annual fee.

With numerous online investment platforms now offering SRI portfolios and thematic investing focused on social and environmental impact, you have many great options to choose from to invest in good. By investing this way, you can aim to achieve solid returns while also helping to create positive change.

How to Get Started With Socially Responsible Investing

To get started with socially responsible investing (SRI), there are a few steps you’ll want to take. SRI allows you to invest in companies that align with your values and make a positive impact.

Determine Your Priorities

Decide which social and environmental issues are most important to you, such as climate change, human rights, diversity, or healthcare. The companies you invest in should reflect those priorities. Some of the most common areas of focus in SRI include:

  • Environmental, Social and Governance (ESG) factors: Choose companies with strong environmental, social and governance practices. This includes reducing pollution, ensuring safe working conditions, and having a diverse leadership.
  • Impact investing: Invest directly in companies developing solutions to social and environmental problems, such as renewable energy or healthcare innovations.
  • Shareholder advocacy: Invest in companies open to improving their ESG policies and then use your shareholder rights to file resolutions and cast proxy votes to advocate for positive change.
  • Faith-based: For religious investors, choose companies aligned with values of your faith or denomination. This may exclude certain industries like alcohol, tobacco or weapons.
  • Thematic: Invest in a specific niche like green energy, community development or sustainable agriculture.

Find the Right Platform

Several investment firms and robo-advisors now offer SRI options. Do some research to find ones that match your priorities and needs. Some top platforms for SRI include:

  • Betterment: Offers SRI portfolios that exclude companies incompatible with responsible values. Fees are 0.25% of assets under management.
  • Ellevest: Robo-advisor aimed at women investors with SRI options focused on companies advancing women in leadership. Fees range from 0.25% to 0.5% of AUM.
  • Swell Investing: Impact investing platform offering themed portfolios in areas like renewable energy, clean water and disease eradication. Fees are 0.75% of AUM.
  • OpenInvest: Allows you to customize portfolios based on specific ESG issues and impact themes. Fees range from 0.5% to 0.75% of AUM depending on account type.

Start Investing

Once you’ve selected your priorities and an SRI platform, you’re ready to invest. Most allow you to start with as little as $500 to $5,000. With regular contributions and the long-term growth potential of the stock market, your SRI portfolio can make a meaningful difference over time. Monitor your investments regularly and make changes as needed to keep your money flowing to the causes and companies you care most about.

Tips for Choosing the Right SRI Platform

When choosing an online investment platform for socially responsible investing (SRI), consider these tips:

Fees

Look for low or no account fees, trading commissions, and expense ratios on SRI funds and ETFs offered. Some platforms charge higher fees for SRI options, while others offer them at no additional cost. Compare fees across platforms to find affordable SRI investing.

Fund and ETF Selection

Choose a platform with a wide range of SRI funds and ETFs from leading fund families across sectors. Prefer those with a mix of environmental, social, and governance (ESG) as well as faith-based options. Review the investment objectives and holdings of funds to confirm they match your SRI values.

Research and Education

Select a platform that provides resources to help you research SRI options and improve your ESG investing knowledge. Look for issue-focused fund screeners, sustainability ratings, ESG news and insights, educational tools, and a knowledge base. The more you understand about SRI and ESG issues, the more you can invest according to your values.

Shareholder Advocacy

Some platforms facilitate shareholder advocacy by offering proxy voting on resolutions and the ability to directly engage with companies on ESG issues. See if advocacy and impact options are available and important to your SRI approach.

Account Types

Check if the platform offers tax-advantaged accounts for SRI, such as IRAs, 401(k)s and HSAs. While any investment account can be used for SRI, tax-advantaged accounts provide additional benefits. See if the SRI options you prefer are available within the tax-advantaged accounts offered.

By evaluating platforms based on these factors, you can choose one that aligns with your financial and social values as well as needs. With the right platform and approach, you can invest for good and work to create positive change.

Questions to Ask When Selecting an SRI Platform

When choosing an online investment platform for socially responsible investing (SRI), there are several questions you should ask to determine if it aligns with your values and needs.

What causes and social issues do they support?

The range of SRI options is broad, from environmental and sustainability funds to those supporting social justice issues. Review what specific causes, sectors or ESG criteria the platform focuses on to ensure they match your priorities.

What investment options do they offer?

Look at the types of investments available, like individual stocks, mutual funds, ETFs or IRA/401K plans. See if they provide recommendations or automated investment options. More limited options may reduce flexibility and control in your portfolio.

Do they clearly report on impact?

Leading SRI platforms should provide transparent reporting on the social and environmental impact of your investments. Look for specifics on metrics like carbon footprint, board diversity, employee benefits and community programs. Vague or limited reporting may indicate a lack of meaningful impact.

What are the fees?

Fees for SRI platforms vary but may be slightly higher than traditional platforms. Compare fees for any recommended funds or managed account services. While higher fees could indicate more resources devoted to research and due diligence, make sure any difference seems reasonable based on the additional impact and services provided.

How do they evaluate companies and funds?

Evaluate what criteria and standards the platform uses to determine SRI options. Look for a well-defined methodology focused on meaningful ESG factors. Some rely on third-party data providers while others do their own proprietary analysis. More rigorous screening and a forward-looking evaluation of risks and opportunities tend to produce better options.

Asking the right questions can help guide you to an SRI platform that provides suitable investment options focused on the causes you care most about, high-impact solutions and long-term sustainable value. Choosing well means your money can work for positive change.

The Benefits of Socially Responsible Investing

Investing in socially responsible companies and funds provides several meaningful benefits.

Promotes Ethical Business Practices

Socially responsible investing (SRI) supports companies that uphold strong ethical and social values, and environmental sustainability. By investing in these companies, you are using your capital to positively shape business practices and influence corporate behavior.

Competitive Returns

SRI funds and stocks have shown the potential for returns comparable to traditional investment products. Studies have found little difference in performance between SRI funds and general market funds. With demand growing, many new SRI products are available that provide opportunities for solid financial returns.

Tax Benefits

Some SRI products like green bonds or impact investing notes may provide tax benefits for investors. Certain securities may qualify for tax credits or exemptions for renewable energy or community development projects. Check with your tax advisor on the specific tax implications.

Help Underserved Communities

Impact investing funds direct capital to projects in underserved communities to help address societal problems like affordable housing, healthcare, education and financial inclusion. Investments are made with the intention to generate positive social and environmental impact alongside a financial return.

Millennial Appeal

The millennial generation is very concerned about issues like climate change, diversity, and sustainability. SRI products that align with these values may attract interest from millennial clients and employees. For companies, SRI can be an important tool for reaching and retaining top millennial talent by demonstrating a commitment to social and environmental responsibility.

In summary, SRI provides investors the opportunity to support causes they care about while still aiming for solid investment returns. The demand for SRI products and services will likely only increase over time as more people look to make a positive impact with their investment dollars. With many options now available, SRI can be accessible for all investors.

Risks and Drawbacks of SRI Investing

While socially responsible investing (SRI) allows investors to support companies that align with their values, it does come with some potential downsides to be aware of.

Limited options.

The pool of SRI stocks and funds is smaller than the broader market, limiting choice and diversification. Investors may miss out on high-performing investments that do not meet SRI criteria. With fewer options, SRI funds and ETFs also tend to have higher fees.

Underperformance risk.

SRI funds that exclude entire industries or sectors could underperform the broader market. While some research shows SRI funds can match or outperform traditional funds over the long run, there is a chance of lower returns, at least in some years. Investors must go in with realistic expectations.

Greenwashing.

Some companies may exaggerate or mislead investors about the environmental or social impact of their business practices, a practice known as “greenwashing.” Investors should scrutinize company reports and reviews to determine the authenticity of SRI claims before investing. Independent certifications from third-parties like B Lab can also help verify a company’s sustainability and ethics.

Monitoring challenges.

Companies and sectors that were once considered ethical or sustainable may change over time. Investors must actively monitor their SRI funds and holdings to ensure companies continue meeting their ESG criteria and do not engage in controversial business practices. As with any investment, SRI investors should review fund holdings and performance regularly.

While SRI investing aims to generate positive impact, investors must remain diligent. Going in with realistic expectations about options, returns, and ongoing monitoring needs will help maximize the benefits of SRI. With a long-term, diversified approach, investors can achieve strong financial and social returns, but there are real risks and drawbacks to be considered.

SRI Investment Options: Stocks, Bonds, Funds and More

As an investor looking to make a positive impact, you have several socially responsible investment (SRI) options to choose from. Beyond stocks and bonds, consider the following:

Mutual Funds and ETFs

For hands-off investors, mutual funds and exchange-traded funds (ETFs) that focus on SRI are convenient choices. These fund managers select companies that meet environmental, social and governance (ESG) criteria. Some well-known SRI fund families include Calvert, Parnassus and Portfolio 21. ETF options include iShares MSCI KLD 400 Social ETF (DSI) and SPDR SSGA Gender Diversity Index ETF (SHE).

Green Bonds

Green bonds are fixed-income securities issued by governments, corporations and other entities to finance projects that have positive environmental and/or climate benefits. The World Bank issues green bonds to support renewable energy and energy efficiency projects in developing countries. Corporations like Apple and Starbucks also issue green bonds to fund sustainable initiatives.

Impact Investing

For investors who want to target specific social or environmental issues, impact investing aims to generate measurable social and environmental impact alongside financial returns. Some platforms that offer impact investing include:

  • Calvert Impact Capital: Provides loans and investments in underserved communities in the U.S. and developing countries. Target issues include affordable housing, education, healthcare and sustainable agriculture.
  • Microplace: Allows people to invest small amounts of money in microfinance institutions, social enterprises and sustainable farming cooperatives in developing countries.
  • Wunder Capital: Provides investment opportunities in commercial solar energy projects across the U.S. Investments start at $1,000 and offer annual returns of 3% to 8%.

As an investor, you have the opportunity to put your money to work for the greater good. The options for socially responsible and impact investing continue to grow, giving you more ways to invest for both financial and social returns.

Online Investment Platforms FAQs: Your Top SRI Questions Answered

Many investors have questions about socially responsible investing (SRI) and online investment platforms. Here are answers to some of the most frequently asked questions.

What types of investments can I make through online SRI platforms?

You can invest in stocks, bonds, mutual funds, and ETFs that meet environmental, social, and governance (ESG) criteria through SRI platforms. Some platforms focus on specific impact areas like renewable energy or affordable housing. Others offer broad-based SRI portfolios.

How do online SRI platforms evaluate companies?

Platforms analyze companies based on ESG factors like:

  • Environmental impact (e.g. carbon emissions, pollution, natural resource usage)
  • Workplace practices (e.g. employee satisfaction, diversity, safety standards)
  • Product impact (e.g. healthcare, education, sustainable products/services)
  • Corporate governance (e.g. board diversity, executive compensation, transparency)

Companies that rank highly across these metrics may be included in SRI portfolios. Those with poor ESG scores are often excluded.

Do SRI investments generate good returns?

SRI investments have the potential to generate returns comparable to traditional investments. Some studies show that companies with strong ESG practices may outperform their peers in the long run. However, there is no guarantee of higher returns. As with any investment, there is a risk of loss.

What fees do online SRI platforms charge?

Fees vary but often include:

  • Account management fees: Typically 0.25-0.5% of assets under management. Some platforms waive fees for small accounts.
  • Fund fees: If you invest in mutual funds or ETFs, the platform and fund manager will charge fees.
  • Transaction fees: Some platforms charge for buy/sell orders. Others offer commission-free trading.

Compare platforms to find one that suits your investment needs and budget. Some leading low-cost options for SRI include Betterment and Wealthsimple.

How can I get started with an online SRI platform?

  1. Review different platforms to compare investment options, fees, and account types offered.
  2. Open an account on your chosen platform and fund it. Most allow you to set up automatic contributions from a bank account.
  3. Select SRI portfolios or funds to invest in based on your financial goals and impact priorities.
  4. Monitor and rebalance your investments over time as needed to meet your objectives.

SRI platforms make it easy for investors to align their money with their values. By asking questions and doing your research, you can invest in the future you want to see.

Conclusion

As an investor, you have the opportunity to align your money with your values. By choosing socially responsible investing platforms, you can support companies and causes making a positive impact. Whether you want to invest in renewable energy, fair trade goods, or emerging markets, there are attractive options to match your interests. While returns are still important, SRI gives you a way to fund the change you want to see in the world. By leveraging technology and online investment platforms, sustainable and impact investing is more accessible than ever. You have the power to invest in the future you believe in.

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