So you have investments most likely in your brokerage account or in your 401(k) and you’re realizing that you might be invested in companies or funds that you wouldn’t otherwise support (e.g. private prison companies and gun manufacturers). Now what?
First things first, it’s always good to regularly check in with your investments and make sure you know and understand where your money is and what it’s doing. It’s also a good idea to think about what’s most important to you. For starters, do you want to divest from companies that are exploitative on any level because then the public markets are probably not going to be for you. Or are you looking for a financial return in addition to wanting to direct your investments to companies that share your values and your vision for the future? If you’re looking for the latter, then let’s talk about sustainable investing and how you can get to know your investments a little better.
Quick definitions thanks to Investopedia:
A mutual fund is a professionally managed investment portfolio that allows investors to pool their money together to invest in something. When you put money in a mutual fund, you’re basically buying bits and pieces of all those companies.
An ETF involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.
Oftentimes, you are invested in mutual funds or ETFs. If you are invested in individual stocks, it’s pretty straightforward to figure out whether or not the company’s values are aligned with your own. You can research the individual company and also look at third party rating companies to see how specific companies score from a sustainability point of view. The tricky part about these ratings is that they are all different depending on who is doing the rating. You can find free individual company sustainability ratings here:
If your portfolio is made up of mutual funds and ETFs, there are several resources that may be helpful for you.
You can start by using As You Sow’s Invest Your Values tool. As You Sow is a non-profit whose mission is to promote environmental and social corporate responsibility through shareholder advocacy, coalition building, and innovative legal strategies. You can use the Invest Your Values tool to search the name or symbol of your mutual fund using different issue lenses such as deforestation, gender equality, and fossil fuel free. This free tool will then provide a report card of your fund. You can also look at As You Sow’s top rated funds for each issue area and there’s an action toolkit that provides information on how you can talk to your financial advisor or plan manager in the case of 401(k)’s about how they can help to make your investment options more sustainable.
yourSRI is a paid service, but you can view some information for free. Similar to As You Sow, you can input your funds into their search tool and it will give you a sustainability rating.
US SIF, the Forum for Sustainable and Responsible Investment, offers a chart that displays all sustainable investment mutual funds and ETFs offered by US SIF's institutional member firms. This public tool is meant for individual investors to compare cost, financial performance, screens and voting records of competing funds.
There are also paid services that can be much more robust such as YourStake.
Now you’re ready to go forth and take a peek under the hood to see what your money is actually invested in. If you want to take the next steps in aligning your money with your values, check out our resource on how to get started with investing sustainably. As always, let us know if you have any questions!