Socially Responsible ETFs: Ready to Gather Some Serious Assets?

Includes: DSI, NASI, PBW, QCLN
by: Tom Lydon

ETFs are taking over where mutual funds left off in many sectors, and the socially responsible investing space is no exception. There are plenty of broad-based funds to get the exposure you may want.

Morningstar Inc. categorizes 24 ETFs as socially responsible, up from 17 in December 2008 and just a couple five years ago. The uptick in the number of funds available may reflect the demand for the access to this sector of the market. The reason?

According to Jerilyn Klein Bier for Financial Advisor magainze, if the United States could focus on building out its alternative energy infrastructure, it might in turn help boost such ETFs. One solution may be in “industries that can truly create new jobs. In particular, developing areas like wind power, increasing solar installation, manufacturing more electric cars and shifting toward natural gas as a car fuel.

There’s about $3.2 billion invested across 24 socially responsible ETFs, which is a broad term used to describe funds that invest in companies that have strong corporate governance or are environmentally responsible. Some of these funds screen out companies involved in “sin” industries, such as gambling, drinking or tobacco. As the trend toward funds such as these gain momentum, these ETFs are expected to grow more in numbers and assets.

How do they perform, though? Favstocks took a look recently and found that they can perform as well as anything else, although it depends highly on market conditions. When the economy sinks, socially responsible ETFs may follow suit.

  • ESG Shares North America Sustainability Index (NYSEARCA:NASI)
  • iShares FTSE KLD 400 Social Index Fund (NYSEARCA:DSI)
  • PowerShares WilderHill Clean Energy Portfolio (NYSE:PBW)
  • First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN)

Tisha Guerrero contributed to this article.

Disclosure: None