A Guide To Choosing An ETF That is Socially Responsible

As the world continues to become more socially conscious, investors are increasingly turning to socially responsible investing (SRI) as a way to align their investments with their values.

One popular way to invest in SRI is through exchange-traded funds (ETFs). However, with so many options available, it can be challenging to navigate the world of socially responsible ETFs. That’s why we’ve put together this guide to help you choose an ETF that is both socially responsible and aligned with your investment goals.

We’ll walk you through the key considerations you should keep in mind when selecting a socially responsible ETF to equip you with the knowledge necessary to choose an ETF that is socially responsible and reflects your values and priorities.

Let’s get started!

Look at the ETF’s Holdings

One of the first things you should do when evaluating a socially responsible ETF is to look at its holdings. This will give you an idea of what types of companies the ETF is investing in and whether they align with your values.

Many socially responsible ETFs will have a list of their top holdings available on their website, but you can also find this information through various financial websites.

Consider what industries the companies are in and whether those industries align with your values. For example, if you’re concerned about climate change, you may want to avoid investing in companies that are heavily involved in fossil fuels. 

Read Sustainability Reports

Many socially responsible ETFs will publish annual or quarterly reports that provide detailed information on their screening criteria, portfolio holdings, and overall impact on society and the environment.

Reading these reports can give you a deeper understanding of the ETF’s investment philosophy and the specific factors it considers when selecting companies for its portfolio. 

That said, when reading sustainability reports, pay attention to the specific metrics and criteria the ETF uses to evaluate companies. You want to choose an ETF which uses a comprehensive screening process that considers a wide range of factors, including environmental impact, social responsibility, and ethical governance.

Look at the Fund’s Track Record

Another factor to look at when evaluating an ETF is its track record. This will give you a clear idea of how the fund has performed in the past and whether it has been successful in achieving its social responsibility goals.

Consider its long-term performance relative to its benchmark index and other similar funds as well as its ability to weather market downturns while maintaining a high level of social responsibility. 

A top tip is to also consider a fund’s management team. You have to make sure they have a history of success without straying from the fund’s values and priorities.

In Conclusion

Choosing a socially responsible ETF requires careful consideration of a range of factors, including the fund’s holdings, sustainability reports, and track record. By doing so, you can invest your money in a way that makes a positive impact on society and the environment.

Remember to stay up-to-date on any changes to the fund’s holdings and evaluate them regularly to ensure they still align with your values.