Do Good and Build Wealth with ESG Investing Robo-Advisors
“80% of the 200 studies reviewed showed that stock price performance is positively correlated with good sustainability practices” ~Study by the University of Oxford
Socially responsible robo-advisor investing is more than a fad, it’s a full-blown movement. The premise of sustainable investing or ESG robo-advisors is that consumers hunger to invest their money in line with their personal values. A recent Investment News article claims that financial advisors without socially responsible investing choices will sacrifice clients.
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*Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link.
Robo-advisors recognize the cry for SRI investing (sustainable, responsible, impact) options and are filling that need.
There are at least 190 socially conscious ETFs with $19.3 billion AUM, traded on the U.S. markets, according to ETF.com. Investors will find equity, commodity, fixed income and asset allocation ETFs. The largest SRI ETF is the Invesco Solar ETF (TAN), focused on companies in the renewable energy sphere.
If you’re seeking the simplest way to tap into the ESG investing trend, you might buy a socially responsible ETF.
Although, a socially responsible investing robo-advisor might be for you if you prefer:
- Professional investment management
- Low investment management fees
- The opportunity to mix DIY investing and investment management
A few digital investment advisors focus solely on socially responsible investing, while others include SRI portfolios within their menu of available strategies.
6 Best Socially Responsible Investing Companies
1. M1 Finance Socially Responsible Investing
The M1 finance app is a perfect solution if you’re seeking to craft your own portfolio and leave the management to the pros. M1 uses a “pie” portfolio model, with each fund, stock, or specific type of asset as one piece of the pie. You choose the percentage to invest in each and M1 Finance does the rest. If you’re a socially conscious investor, then populate one piece or more of your investment pie with socially responsible ETFs or socially conscious companies. Or chose an “M1 Finance Expert Pie” from the “Responsible Investing” category.
As and added bonus, M1 Finance is free. Yes, that’s right, no management fees!
M1 Finance also manages and rebalances your investments to keep them aligned with your preferred investment percentages.
ESG investing benefits of investing with M1 Finance robo-advisor:
- Free investment management and rebalancing.
- Pick your own socially responsible funds and stocks, and let M1 Finance manage them for you.
- Select from two Socially Responsible M1 Finance expert pies, crafted by Nuveen.
- Add in other types of investments to your M1 Finance portfolio such as bond funds, real estate funds or even a target date or hedge fund allocation.
The beauty of M1 Finance is the ability to perfectly customize your investments to align with your goals and values. And the socially responsible portfolios make it that much more accessible to do good and make money. If you choose an expert pie from the Responsible Portfolios option, be aware that each option offers a diversified ESG stock portfolio, one with a U.S. focus and the other includes international stocks. For diversification, you’ll need to add in a bond ETF to the ESG pie.
Best for:
- Investors who want to choose a mix of socially responsible funds and receive free management.
- Investors who are seeking professionally crafted ESG portfolios and investment management.
- Investors who want free investment management, a high yield cash account and borrowing in one platform.
Read: M1 Finance Socially Responsible Investing Review
2. Betterment SRI Portfolios
Betterment is one of the oldest robo-advisors and continues to innovate. Betterment provides access to human advisors-for additional fees, crypto currencies and three socially responsible options including the Betterment Climate Impact Portfolio, Social Impact and the comprehensive Betterment Broad Impact SRI investment portfolio.
Sticking with its low-fee, diversified approach, the Betterment SRI (socially responsible investing) portfolios elected to replace the stock allocations with ESG alternatives.
Betterment replaces their typical funds with socially responsible investments. Betterment offers extensive research regarding their SRI portfolio creation and returns. For investors worried that socially responsible investing will hurt returns, the Betterment SRI performance data shows that returns are equal to or better with the Betterment SRI portfolios as compared with the Core offers.
Investors in the Betterment SRI portfolios should realize that the bond allocations do not include SRI bond funds. You can read more about the Betterment SRI investment portfolios by clicking below.
Best for:
- Investors seeking a robo advisor with no minimum investment amount – $10 to begin investing.
- Investors who want a robo-advisor with access to financial advisors.
- Investors who would like a Climate Impact, Social Impact or Broad SRI investors portfolio.
- Investors who also want cash management and high yield savings, through Betterment partner banks.
Bonus: Stash vs. Robinhood vs. Acorns Apps
3. Sustainfolio
The Sustainfolio robo-advisor focuses only on socially responsible investing. This robo investor only invests in funds that own shares in companies that have passed socially responsible investment criteria. The company CEO, Dale Wannen, hand-picks the investment funds based upon their adherence to SRI criteria as well as a low fund management fee structure. Sustainfolio investors have direct access to a financial advisor as well.
Sustainfolio is among the small group of robo-advisors that are committed soley to socially responsible investing. SRI is not an afterthought with Sustainfolio. Sustainfolio includes both stock and bond ESG exchange traded funds.
Sustainfolio offers 4 ESG investment robo-advisor choices:
- Core ESG Portfolio
- Environmental Impact Portfolio
- Social Impact Portfolio
- Governance Impact Portfolio
Charles Schwab is the custodian for the Sustainfolio robo-advisor. The account is protected by SchwabSafe, a collection of security tools that keep your personal and financial information safe.
Best for:
- Anyone who wants an SRI-only robo-advisor.
- Younger investors who want to support clean air, clean water and low carbon emissions.
- Experienced investors who prefer not to DIY their sustainable, socially-conscious investing.
- Investors who want direct access to the Sustainfolio founder.
Read Sustainfolio Review
4. Wealthfront
The Wealthfront socially responsible investment options are among the most comprehensive of any of our ethical investment firms. Those who want a completely diversified SRI portfolio can select the “Socially Responsible” option upon signup. The Wealthfront SRI portfolio is available in a range of risk levels.
Wealthfront’s socially responsible investing opportunities have exploded with the addition of more than 200 ETFs that clients can add to an existing Core Portfolio. Actually, the Wealthfront robo-advisor also enables clients to craft their own portfolios from the available slate of ETFs, plus two Grayscale cryptocurrency funds which Wealthfront will manage.
For those that want a combination of digital investment management and the opportunity to trade stocks, Wealthfront recently launched a fee-free stock trading platform.
Regardless of which Wealthfront Socially Responsible investing portfolio that you select, you have access to the range of services and features available on the platform:
- Professional investment management – Daily monitoring of investments and rebalancing back to preferred asset allocation as needed. This keeps you investments in line with your risk comfort level.
- Path digital financial planner – After linking your financial accounts, you have a complete analysis of your money, along with targeted recommendations.
- Tax loss harvesting – Daily monitoring of taxable accounts for opportunities to reduce taxes by offsetting investment gains with losses.
- High yield cash account.
- Wealthfront borrowing.
- 200+ ETFS available to customize your portfolio, or create a new one, for Wealthfront to manage.
- Self-directed stock trading account.
For those seeking a socially responsible investment firm, Wealthfront fits the bill with a low management fee and affordable $500 minimum investment.
Best for:
- Investors who want managed portfolios with SRI investing customization options.
- Tax-loss harvesting and ongoing portfolio management.
- Those who want a comprehensive financial platform with high yield cash, lending, robo-advisor and self-directed investing.
5. Earthfolio
Earthfolio is an online investment advisor for investors who only want ESG companies in their portfolios.
According to the company website, “Every portfolio we build invests exclusively in a broad spectrum of sustainable mutual funds that screen on up to ten environmental, social, and governance, criteria.”
Like other robo-advisors, Earthfolio begins with a brief questionnaire. The investor’s answers guide the asset allocation which aligns the user’s goals and risk tolerance with her asset allocation (percent invested in each type of fund). The company also rebalances and manages the investments. This is where the similarity with other robo-advisors ends.
In general, Earthfolio’s available investment funds, most of which lean towards the socially conscious realm, are not low fee index funds, but higher cost professionally managed offerings. This leads to greater underlying costs. It also creates a challenge for this robo to beat the indexes.
Unlike many of Earthfolio’s robo-advisory peers, this company offers an ESG investing menu of both stock and bond funds by a variety of providers. A sample of the available Eartfolio funds includes; Calvert Green Bond (CGAFX), TIAA-CREF Social Choice Bond (TSBRX), CRA Qualified Investment (CRATX), Access Capital Community (ACASX) and more.
Earthfolio’s bond and stock funds cover the socially conscious investing landscape and invest in firms committed to a wide range of socially responsible investment segments including:
- Environment
- Clean Tech
- Equality & Diversity
- Human Rights
- Corporate Governance
- Community Development
- Fossil-Fuel Free
Earthfolio is a viable choice for the diehard socially conscious robo-advisor investor, who wants her entire portfolio to be invested in line with her values. Earthfolio’s management fee is 0.50%, like other robo-advisors, yet the underlying fund management fees are a bit pricey. Finally, there may be lower cost impact investing robo-advisory alternatives to meet a similar end.
Best for:
- Wealthier investors – reguires a $25,000 minimum investment amount.
- Investors seeking broad SRI investing strategies.
- Committed investors to SRI, willing to pay a bit higher management fee – 0.50% fee.
Socially Responsible Robo Advisors – Runners Up
There are other ESG investing robo-advisors, to explore that didn’t make the first cut, but might be appropriate for you. If you already have an account at one of these firms, you might check out their ESG robo-advisor as well.
Axos Invest (formerly Wise Banyan) – Offers three customized “Portfolio Plus” SRI options to add to your portfolio, Socially Minded, Clean Energy and Water.
Empower (Personal Capital) – Has socially responsible investing for their advisory clients, appropriate for those with at least $100,000 to invest.
Ellevest – This women-focused robo advisor also offers a Socially Responsible investment track.
Merrill Edge Guided Investing – Bank of America customers might take a look at the Merrill Edge Guided Investing SRI portfolio.
Attention to our environment and social responsibility is important today. Those that want to expand their commitment to our world and community might explore adding an SRI robo-advisor to their investments.
E*Trade Core Portfolios – The E*Trade robo advisors offers a sustainable investment option. Additionally, all Core Portfolios clients have access to financial advisors as well.
FAQ
Is there a socially responsible IRA?
Is socially responsible investing profitable?
What are the origins of socially responsible investing?
SRI Investing Wrap Up
There is a socially conscious investing robo-advisor platform for every type of investor. From the woman who invests solely in stock and bond funds that align with her values to the man who wants the opportunity to include ESG investing as a part of his investment mix. That’s the beauty of the competitive environment. There’s an investment management service tailored to each type of investor.
In the end, sum up your own values and the features you’re seeking in a digital investment manager. Then, do your own due diligence. As demand grows, it’s likely that more impact investing robo-advisors will emerge.
Methodology
We began by reviewing the pool of available robo-advisors. Those with access to socially responsible robo advisors were then held under a microscope. We considered, the range of ESG funds and options. We preferred those platforms that had customizability within the socially responsible realm. On our list were several firms that enabled robo-advisors and customization options. More ESG choices were preferred over less expansive offers. We also linked to the complete reviews, so potential clients can look at the overall platform, in addition to their SRI features.
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Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.
