Green Century Investing Avoids Fossil Fuels
Defining fossil fuel free investing
From an Article by Leslie Samuelrich, President, Green Century Capital Management, 2/19/16
The global movement to divest from fossil fuels has taken off, growing from a campaign on a few college campuses in 2012 to more than 500 institutions representing over $3.4 trillion in assets under management.
If you are considering joining the movement, the first questions you might ask are, What does it mean to invest fossil fuel free? And how do I get started?
There are lots of people trying to answer this question right now. Some investors begin by eliminating coal plants, or fracking companies from their portfolios. 350.org asks for divestment from the top 200 fossil fuel companies by carbon reserves.*
As environmentally responsible investors with a deep commitment to a fossil fuel free future, Green Century has been engaged with the conversation around defining divestment for a long time. We have come to believe that, for moral, political, and financial reasons, fossil free investing should mean cutting financial ties with all fossil fuel companies.
For our funds, investing fossil fuel free means excluding all companies that extract, explore, refine, or process coal, oil, or natural gas, as well as fossil fired utilities.
When you invest with the Green Century Funds, you know your investments are supporting a fossil fuel free future, no matter the definition you use.
If you are already invested in the Green Century Funds, thank you for helping to grow the fossil fuel free movement. If you are considering going fossil fuel free, download our free personal guide to learn how to get started today.
*The list of 200 companies used by 350.org is known as the Carbon Underground 200. It includes the top 100 public coal and the top 100 public oil and gas companies globally, based on the potential carbon emissions contained in their reserves.
To obtain a Prospectus that contains information about the Funds, please click here for more information, email info@greencentury
Stocks will fluctuate in response to factors that may affect a single company, industry, sector, or the market as a whole and may perform worse than the market. Bonds are subject to risks including interest rate, credit, and inflation. The Funds’ environmental criteria limit the investments available to the Funds compared to mutual funds that do not use environmental criteria.
The Green Century Funds are distributed by UMB Distribution Services, LLC. 235 W Galena Street, Milwaukee, WI 53212.
Inside the free Guide:
- Learn the moral and financial reasons to divest.
- See the different ways you can reinvest.
- Read a special introduction written by Bill McKibben of 350.org
- Published by Green Century, 350.org, and Trillium Asset Management
Learn more about investing Fossil Fuel Free on our updated resources page.
About Green Century
Green Century manages two fossil fuel free mutual funds that keep your money out of environmental polluters and seek competitive returns.
>> The Green Century Equity Fund invests in the longest-running socially responsible stock index, minus the fossil fuel companies in that index. Read more …
>> The Green Century Balanced Fund invests in the stocks of environmentally responsible companies, and green bonds. Read more …
Request Information by Mail or Download the Green Century Prospectus
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Introducing Our Socially Responsible Investing (SRI) Portfolio
From Betterment Investing, July 19, 2017
Betterment is moving the category forward for socially responsible investors by offering an SRI portfolio that is fully diversified and keeps costs low.
It makes sense that some investors try to align their investments with the values and social ideals that shape their world view. The way you live, the career you choose, and the people you care about align with your personal values; shouldn’t your investments do the same?
Socially responsible investing (SRI) is an approach to investing that reduces exposure to companies that are deemed to have a negative social impact—e.g., companies that profit from poor labor standards or environmental devastation—while increasing exposure to companies that are deemed to have a positive social impact—e.g., companies that foster inclusive workplaces or commit to environmentally sustainable practices.
Today, we’re proud to introduce Betterment’s first SRI portfolio. Our SRI strategy aims to maintain the diversified, low-fee approach of Betterment’s core portfolio while increasing investments in companies that meet SRI criteria. The Betterment SRI portfolio is available to all Betterment customers with no minimum.
To learn more about how and why we’ve built the Betterment SRI portfolio, read on to the following sections. Our full approach to our SRI portfolio can be found in the technical whitepaper here.
Why Is Betterment Developing an SRI Portfolio?
Betterment is dedicated to offering a personalized experience for its customers. This means providing options that help customers align our advice to their personal values.
We decided to develop an SRI portfolio because, currently, there are three major ways that investors attempt to execute an SRI strategy, and none meets an investor’s full needs:
Some investors buy SRI mutual funds, settling for unreasonably high fees compared to performance and often losing out on important tax and cost optimization opportunities.
Others opt for one of several SRI-specific investment managers whose SRI portfolios may fulfill the investors’ desire for SRI screening but do not always provide proper diversification against risk.
Still others try to pick their own basket of SRI investments—a challenging, time-intensive, and inaccessible approach for most everyday investors.
We set out to do better for SRI investors. You should not have to choose between holding an SRI portfolio and following a low-cost, diversified investment strategy with tax optimization in order to make sure your investments reflect your personal values.
SRI Portfolio
The Betterment SRI portfolio is designed to achieve this balance. It allows socially conscious investors to express that preference in their portfolios without sacrificing the aspects of Betterment’s advice that protect their returns the most: proper diversification, tax optimization, and cost control.
What Is Betterment’s Approach to SRI?
While SRI has been around for decades, especially for institutions like churches and labor unions, the SRI funds available to individual investors have really only emerged in the last 20 to 30 years. And most of these SRI products have been actively-managed mutual funds with high fees. Only recently have lower cost options, like ETFs for SRI, emerged in the market.
As we developed our SRI Portfolio, we analyzed all low-cost SRI funds available, searching for products that could replace components of our core strategy without disrupting the diversification or cost of the overall portfolio.
We found that the only asset class (i.e., portfolio component) that we could confidently replace with an SRI alternative today is the U.S. large-capitalization stock allocation. Other asset classes, such as value, small-cap, and international stocks and bonds are not replaced with an SRI alternative in our portfolio either because an acceptable alternative doesn’t yet exist or because the respective fund’s fees or liquidity make for a prohibitively high cost to you, the customer.
While just one asset class is affected in our SRI portfolio compared to the Betterment portfolio, that change has an outsized impact on the social responsibility of your overall portfolio. For one, many investors are most concerned about the social responsibility of the largest U.S. companies in their portfolios, which often set standards for acceptable corporate behavior that other companies try to emulate. In our SRI portfolio, stocks (but not bonds) of companies like Exxon, Chevron, Philip Morris, Wells Fargo, Walmart, and Pfizer may be excluded because they are deemed not to meet social responsibility criteria. Other companies deemed to have strong social responsibility practices, such as Microsoft, Google, Proctor & Gamble, Merck, CocaCola, Intel, Cisco, Disney, and IBM may make up a larger portion of the SRI portfolio than they do for Betterment’s core portfolio. In addition, a major reason why there are no acceptable SRI alternatives for other asset classes is that the demand for these products has not been sufficient to encourage fund managers to create them. By electing Betterment’s SRI portfolio, you signal to the investing world that there is a demand for high quality SRI investment options and may help to encourage the development of well-diversified, low-cost SRI funds in a wider variety of asset classes.
If you’re interested in a more quantitative understanding of how the Betterment SRI portfolio compares to our core portfolio in terms of social responsibility, you can review the SRI ratings published by MSCI (see below). MSCI’s ratings for the SRI funds used in Betterment’s SRI portfolio are higher than the ratings for the funds used in the Betterment portfolio. For more information on what the numbers mean, click here for our full whitepaper.
Let’s Make Investing More Socially Responsible
As you review our new SRI portfolio, you might ask yourself, “Is it more important that my portfolio is well-diversified with reasonable costs, or should my money be exclusively invested in SRI funds, regardless of the cost or level of diversification?”
This is an insightful question that gets to the heart of the tradeoffs involved in socially responsible investing today. Currently, most accessible SRI approaches make investors choose between a well diversified, low-cost portfolio and an inadequately diversified and/or higher cost portfolio comprised of SRI funds.
Diversification and controlled costs are investing fundamentals that all investors—SRI or not—deserve. They’re principles that live at the heart of fiduciary advice. The only reason other SRI solutions settle for higher costs and less diversification is because the industry isn’t challenged to offer something better. We at Betterment believe we can create a future that does not ask SRI investors to choose.
Today, our SRI portfolio reflects a 42% improvement to social responsibility scores for our U.S. large-cap holdings when compared to our core portfolio. In the future, we will improve our SRI portfolio even further, iterating and adding new SRI funds that satisfy our cost and diversification requirements as they become available.
Get started with the Betterment SRI Portfolio
Get started with our approach to SRI today, and join us as we work to expand our SRI approach together.
Open a Betterment account to explore the portfolio options available to you. If you already have a Betterment account, you can enable the SRI portfolio when adding a new goal or updating your existing goal’s portfolio strategy via the Advice tab of your Betterment account.
Once on your Portfolio tab, you will see an “edit” option under the Portfolio Strategy section. Once you select “edit” you will be sent to the Portfolio Strategy flow where you can opt into the SRI portfolio.
SOURCE: https://www.betterment.com/resources/inside-betterment/product-news/socially-responsible-investing-portfolio/