When it comes to investing, it’s important for investors to choose ETFs that align with their personal values. Doing so allows investors to support companies and causes they believe in while also growing their portfolios.
But what makes an exchange-traded fund socially responsible?
A socially responsible ETF has certain characteristics that set it apart from other investment vehicles. These details show how the company works to make the world a better place through its investments and help you determine whether or not an ETF is a good addition to your portfolio.
Read on to learn about the characteristics of an ETF that is considered socially responsible.
Providing Equal Employment Opportunities
One aspect of responsible investments is ensuring that employees are treated fairly. For example, an ETF that invests in companies offering paid maternity leave or flexible work schedules is socially responsible.
Investors can also actively look for ETFs that promote fair employment practices by screening for specific criteria. For example, a socially responsible ETF may contain specific language in the fund’s prospectus that says the fund does not invest in companies that discriminate against employees based on race, religion, gender, sexual orientation, or other factors.
Limiting Harmful Practices
When selecting investments for your ETF, you may want to avoid companies involved in activities that harm employees, the environment, or the company’s clients. For example, an ETF that includes companies providing benefits to same-sex couples is socially responsible because it does not support harmful practices like discrimination.
It also invests in companies that are following the law and providing benefits to employees in long-term monogamous relationships.
Supporting Environmentally-Friendly Initiatives
By investing in socially responsible ETFs, you can support environmentally-friendly initiatives and reduce harmful practices. With this in mind, you may want to invest in companies that are actively working to reduce their carbon footprint and promote a more sustainable future.
For example, an ETF that invests in clean energy companies is socially responsible because it supports environmentally-friendly initiatives. This ETF is investing in companies actively working to promote clean energy and reduce carbon dioxide emissions.
Rebuilding Wealth In Communities
Another great reason to invest in socially responsible ETFs is their rebuilding of wealth in communities. You can choose to invest in companies actively investing in programs that help low-income and minority communities grow their wealth.
For example, an ETF that invests in companies that provide scholarships to low-income students is socially responsible because it is rebuilding wealth in communities by helping disadvantaged students receive higher education.
The last characteristic of a socially responsible ETF is transparency. When researching ETFs, you may run into several that fall into the socially responsible category, but you may not know exactly how they are making the world a better place.
A socially responsible ETF may include information about the issues it is trying to solve and how it works to make a positive impact. By investing in a transparent ETF, you can see how the fund supports causes you believe in. This can help you feel confident in your investment and ensure that your money is being used in a way you support.
The Bottom Line
When it comes to investing, it’s important for investors to choose ETFs that align with their personal values. Doing so allows them to support companies and causes they believe in while also growing their portfolio.
By investing in an ETF that promotes equal employment opportunities, limits harmful practices, supports environmentally-friendly initiatives, rebuilds wealth in communities, and is transparent, you can trust that your money is being used in a way you support.