Investors have a new resource at their disposal to make aligning their portfolios with their personal values easier than ever.
The Invest Your Values search tools, created by As You Sow, a nonprofit that promotes corporate social responsibility, "offer investors insight into the environmental and social impact of their portfolios, alongside traditional metrics like financial returns," according to a press release. Investors can search the name or symbol of mutual funds or ETFs in six search tools, which provide a "report card" on the fund related to one of the following social or environmental issues:
For those interested in limiting exposure to firearm manufacturers, for example, the report card shows the percentage of the fund's assets invested in gun companies, and if the fund is a member of the Forum for Sustainable and Responsible Investment (US-SIF).
Investors can also browse a list of As You Sow's "top rated" funds, which earn the highest returns and the highest "grades" on each of the issues. Financial performance is based on a comparison to the fund's benchmark index, like the S&P 500.
This comes as 85% of individual investors report being interested in adding sustainable options to their portfolios, according to the Morgan Stanley Institute for Sustainable Investing. Sustainable investing, otherwise known as impact investing, is a strategy that considers a company's environmental, social and corporate governance (ESG) impacts crucial to their long-term success.
"It is all about making it easier for regular folks with a 401(k) plan to know in a few clicks if their investments are aligned with their values," Andrew Behar, As You Sow's CEO, told CNBC Make It in an email, adding that the company plans to add target-date funds and a comparison tool in the first half of 2020.
Morgan Stanley found that despite all-time high enthusiasm for impact investing, just over half of investors are actually engaged in "at least one sustainable investing activity." Some of that can be attributed to the friction of being able to identify sustainable funds. With As You Sow's tools, investors can research their fund options, or select a fund from the "top rated" list to invest in via their IRA or brokerage account (workplace retirement plans are trickier as they only offer select funds to employees). Other companies also offer ESG search tools and ratings, including YourSRI and MSCI.
Each page also provides investors with a "tool kit" to help them talk to financial advisors or other professionals about their desire to invest more sustainably, as well as how to ask their companies to add sustainable options to their 401(k) fund offerings.
Some experts warn that impact investing, a form of active investing, could harm an individual's returns. But an analysis of 11,000 mutual funds by Morgan Stanley found that sustainable investments "provided returns in line with comparable traditional funds" between 2004 and 2018, and that they may offer more stability during periods of market volatility. But as with all forms of investing, future gains are not guaranteed.
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