As the socially-responsible investing (SRI), ESG, and impact investing movements have gained steam, so has the number of companies offering products aligned with investors’ values. Providing low-cost, low-effort personal investment options, U.S. robo-advisors currently have more than $100 billion in assets, and are estimated to reach $2.2 trillion by 2020. To differentiate themselves within the market, and attract the 63 percent of millennials who have invested or intend to put money into socially-responsible investments, socially-conscious platforms and investment options are rapidly expanding. It’s no wonder why – socially-responsible investments are an $8 trillion category that’s expected to continue to grow – especially as baby boomers pass on their wealth to millennials.
With an increasing number of players, it can be daunting for investors who want to align their portfolios with their values to decide which platform is best suited to their financial, environmental, and social impact objectives. Here, we’ve laid out a number of the most prevalent socially-responsible investment online investment platforms to give you the basics of what you need to know – from an impact perspective, given our expertise in this arena – when choosing a platform. For each platform, you can get the quick and basic details about minimums, fees, and types of investment, but also gain insight into how each advisor thinks about what it means to “invest with impact” and the degree of transparency each offers regarding their socially responsible investment products.
For those looking for the quick takeaway:
- Of impact-only online investment platforms, OpenInvest and Swell shine by enabling investors to mix and match among impact themes and providing clear insight into how companies are selected for each.
- Of traditional online investment platforms with SRI options, Hedgeable and WealthSimple offer investors the most transparent and customizable variety of impact-driven investment options.
This piece is not intended to endorse any specific platform, nor provide an analysis regarding the financial performance of different products. Although there is limited transparency about financial performance (with the exception of this comparison by Swell), we encourage you to do additional research into the expected return of each provider when selecting your investment platform.
Quick Assessment: Betterment is one of the biggest platforms on the market ($9B AUM), and offers a low-cost, low-minimum option but only allows for investors to allocate a portion of their portfolios in socially responsible investments.
- Minimum: $0 (digital), $100,000 (premium)
- Fees: 0.25% annually (digital), 0.4% annually (premium)
- Investment Vehicle: ETFs
Impact Overview: Betterment’s SRI Portfolio replaces the standard portfolio’s total U.S. stock market fund through exposure to one of two SRI ETFs (iShares MSCI LD 400 Social ETF vs. two vanguard funds). This SRI investment makes up about a third of the client’s core portfolio, while the remaining two thirds remains standard.
Approach to Assessing Impact: Betterment uses an ESG approach to their SRI portfolio and relies on the framework of MSCI, a provider of ESG data and analytics. See Betterment’s Our Approach to Building an SRI Portfolio for more detail.
Quick Assessment: Earthfolio is an impact-focused platform with a high minimum. It could benefit from greater detail about how socially responsible Mutual Funds are selected and screened using their ESG criteria.
- Minimum: $25,000
- Fees: 0.5% annually
- Investment Vehicle: Mutual Funds
Impact Overview: Invests exclusively in sustainable funds screened on up to ten separate ESG criteria, which include clean tech, non-violence, human rights, community development, environment, and others. Investors cannot customize their portfolios based on sustainability preferences.
Approach to Assessing Impact: A fund’s prospectus must state the specific environmental, social, and governance (ESG) criteria used in stock or bond selection. For each portfolio, EarthFolio screens on up to ten ESG criteria.
Quick Assessment: Hedgeable offers a number of impact and non-impact related investment options at low minimums. It also enables investors to invest in alternative assets such as bitcoin and venture capital.
- Minimum: $1
- Fees: 0.3 – 0.75% depending on amount deposited
- Investment Vehicle: Stocks and Fixed Income
Impact Overview: Offers eight Social Investing Themes including LGBTQ equality, female leadership, alternative energy, and others. Investors can pursue multiple impact themes, depending on factors in the signup process, such as goals and risk tolerance.
Approach to Assessing Impact: Hedgeable emphasizes that they employ strategies across the socially responsible investing continuum: ethical investing, ESG investing, and impact investing. The majority of Hedgeable’s criteria are adopted from existing SRI benchmarks such as MSCI KLD 400 Index. For each theme, Hedgeable provides a methodology and example investments.
Quick Assessment: Motif is a platform focused on theme-based investing, with options ranging from socially-conscious investments, to wearable tech, to oil. Investors can take a highly customized approach to portfolio management and creation, with options to build their own “Motifs” (themes) and share them with others.
- Minimum: $1,000 for impact accounts
- Fees: $9.95/month per Motif
- Investment Vehicle: Individual stocks, ETFs, and bonds
Impact Overview: Investors can purchase a basket of stocks weighted to reflect an investment theme or “Motif”. Motifs allow investors to build their own small-scale funds out of up to 30 stocks or ETFs. Popular socially responsible themes include Sustainable Planet, Fair Labor, and Good Corporate Behavior.
Approach to Assessing Impact: Uses MSCI ESG ratings in their Impact Models. In terms of building the Motifs, as an example, for an earth-focused Motif, the platform takes default asset class Motif and replaces stocks with poor “Sustainable planet” scores (e.g. carbon emissions and carbon footprint) with those with good scores, while maintaining allocation cross sectors and countries.
Quick Assessment: OpenInvest is an impact-focused platform well-suited for investors with a clear idea of their top issues who are interested in a more tailored approach to building a portfolio.
- Minimum: $3,000
- Fees: 0.5% annually
- Investment Vehicle: Individual stocks and a bond mutual fund
Investment Vehicle: Individual stocks and a bond mutual fund
Impact Overview: Investors can choose from more than ten “themes” to mix and match from to create a portfolio customized to their values, including deforestation, women in the workplace, carbon emissions, and gun violence, among others (see available issues). Investors choose companies based on their personal values, as well as vote in shareholder resolutions via swipe on the mobile app. Voting on shareholder resolutions empowers investors to influence companies’ business practices.
Approach to Assessing Impact: Each impact theme screens out bad practices and favors companies considered leaders on the respective issues. The methodology for each impact theme is listed on the respective pages, including what set of companies was screened and the selection criteria used. For certain themes, OpenInvest partners with industry organizations, such as the non-profit JUST invest, to obtain relevant data for each cause.
Quick Assessment: Prophecy’s close engagement with fund managers to assess ESG is impressive, but the sign-up process doesn’t offer intuitive selection of impact preferences.
- Minimum: $5,000
- Fees: 0.6% annually
- Investment Vehicle: Mutual Funds
Impact Overview: Prophecy builds investment portfolios focused on social, environmental and governance causes. Click here for Prophecy’s Impact Examples.
Approach to Assessing Impact: Prophecy screens 1000s of mutual funds to find those that score well under Morningstar Sustainability Rating to evaluate how investments meet ESG challenges. They also conduct personal interviews with the select group of fund managers identified to understand their philosophy and attitude toward ESG investing.
Quick Assessment: Stash is a theme-based advisor with a low minimum and a large number of portfolio customization options, including socially-conscious investments. The platform is only available via mobile app.
- Minimum: $5
- Fees: $1/month for accounts <$5,000; 0.25% annually for accounts >$5,000
- Investment Vehicle: ETFs and individual stocks
Approach to Assessing Impact: Stash’s socially responsible investment themes are largely based upon Blackrock’s iShares portfolios that use MSCI data.
Quick Assessment: Swell is an impact-driven platform great for investors looking for low minimums, flexibility among impact themes, and well-designed user experience.
- Minimum: $50
- Fees: 0.75% annually
- Investment Vehicle: Stocks (baskets of small to mid cap companies)
Impact Overview: Investors choose among six portfolios, which are centered on addressing social and environmental challenges: Green Technology, Renewable Energy, Zero Waste, Clean Water, Healthy Living, and Disease Eradication. Investors can invest across multiple themes by indicating percentage allocations among their portfolios of interest.
Approach to Assessing Impact: Pulls from 1000s of sources, including MSCI ESG rating and alignment with UN Sustainable Development Goals. First, Swell screens companies for commitment to positive impact across multiple areas of its businesses (environment, social impact, governance), then researches company to determine how it derives revenue. Swell requires each company to derive revenue from its associated impact theme to indicate that it’s actively contributing to progress.
Quick Assessment: TIAA Personal Portfolio offers traditional and socially-responsible investing. Investors can allocate their portfolio across a range of socially-responsible TIAA and external investment products.
- Minimum: $5,000
- Fees: 0.3% annually
- Investment Vehicle: Index Funds and ETFs
Impact Overview: TIAA’s Personal Portfolio has four key pillars of responsible investment: ESG Integration, ESG focused funds, Active ownership, and Impact Investments. Socially responsible investments are mainly comprised of TIAA Social Choice Funds and Blackrock’s iShares ETFs.
Approach to Assessing Impact: Provides minimal detail on how socially responsible investments are selected beyond using ESG criteria. Instead, website emphasizes TIAA’s engagements in voting and promotion of board accountability.
Quick Assessment: Wealthfront is a big player in the space ($6B AUM), but current socially-responsible investment offerings are only well-suited to larger investors (>$100,000) who want a hands-on approach to pursuing impact.
- Minimum: $500, but SRI portfolio only available for clients with at least $100,000 in individual securities that comprise an index
- Fees: Free for first $10,000 under management, then monthly advisory fee of 0.25% annually
- Investment Vehicle: ETFs
Impact Overview: Clients using direct indexing will be able to exclude individual stocks in four categories: fossil fuels, deforestation, weapons, and tobacco, as well as other stocks in their personal exclusion.
Approach to Assessing Impact: Wealthfront announced an SRI product in summer of 2017 alongside the launch of competitor Betterment’s SRI portfolio. Relatively little information about their SRI offerings has been disclosed since this announcement.
Quick Assessment: Wealthsimple is a traditional robo-advisor with a socially-responsible offering. Of the larger robo-advisors, Wealthsimple has the most robust and accessible impact offering, as well as a Halal investing portfolio.
- Minimum: $0
- Fees: 0.4 – 0.5% annually (Free for first year if under $5,000)
- Investment Vehicle: ETFs
Impact Overview: Socially responsible offerings draw from 6 SRI ETFs that focus on companies involved in enterprises like clean tech innovation in developing world, efforts to lower carbon exposure and supporting gender diversity in senior leadership roles. Investments also contain municipal bonds that support local investment and government-issued mortgage-backed securities that promote affordable housing (portfolio mix is based on customer risk tolerance).
Approach to Assessing Impact: Wealthsimple built an SRI portfolio with pre-existing ETFs that prioritize low carbon emissions, advance clean tech innovations, and promote sustainable growth in developing markets.
The full and original article can be viewed on PacificCommunityVentures.org
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