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Investing Ethically? Here Are 3 Socially Responsible Funds


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Socially responsible investing (SRI) is fast gaining prominence. Also known as social investing, it takes into account financial returns from investment as well as social/environmental benefits of the same.

To that end, a number of investors are considering parking their money in socially responsible mutual funds. The consumer market has become increasingly thoughtful and interested in "ethical consumption." Such mutual funds invest in companies that follow ethical norms while manufacturing their products, providing services and treating their employees.

Fund managers closely monitor and screen companies that adhere to a specific fund's investment values.

Close the Pay Gap, Invest in Gender-Focused Mutual Funds

Per the new estimates from the National Women's Law Center, a woman who sets out to make a career today will end up losing out on approximately $406,760 in earnings over the next 40 years. To put it simply, a woman earns only 80 cents to a dollar compared to a man. This 20-cent gap can add up to a huge amount over an entire career span.

Keeping such issues in mind, a lot of gender and diversity funds have cropped up in the recent past. Morningstar identifies a total of 15 equity mutual funds and exchange traded funds (ETF) which focus on gender and diversity issues. Once an investor buys such a fund, their investment is counted as one of the votes by a shareholder, who is thoughtful about such issues.

Low Carbon Funds for a Green Future

In the past few years, investors divested at least $6 trillion of assets from fossil fuel funds. Fossil free funds, on the other hand, bear minimal climate risk. These fossil free funds invest in companies that reduce its carbon footprint by assessing total carbon emissions from its company's operations.

One more thing that is assessed is whether a company's management is taking necessary actions to reduce carbon emissions and engaging in productions which are less carbon intensive. Companies with low carbon emission risk will be at an advantage to adapt to stricter carbon standards in the coming days.

Created in the spring of 2017 by Morningstar, the "Low Carbon Designation" for mutual funds seeks to identify funds which hold assets that are relatively greener and leave low carbon footprints on the planet. Such funds are easily found among  large-cap growth  funds because they invest extensively in tech companies and stay away from energy, utilities and materials stocks. ( Read More )

3 Best Choices

We have selected three socially responsible mutual funds with a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more:  Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money ).

TIAA-CREF Social Choice Bond Retail  TSBRX fund invests the lion's share of its assets in bonds while favoring long-term total return through income and capital growth. The fund gives special consideration to companies that satisfy its ESG criteria. TSBRX invests in a variety of investment-grade bonds and fixed-income securities, which may include corporate bonds, U.S. government securities and taxable municipal securities, among other instruments.

This Zacks sector - Inv Grade Bond-Intermediate product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

TSBRXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.65%, which is below the category average of 0.76%. The fund has three and five-year returns of 2.5% and 3.3%, respectively.

American Funds New Economy A  ANEFX focuses on securities of those companies that are expected to benefit by exploiting new technologies or by providing products to meet demands of the changing global economy. The fund is invested in only six fossil fuel stocks and holds two  fossil free badges .

This Zacks sector - Global-Equity product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

ANEFX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.76%, which is below the category average of 1.07%. The fund has three and five-year returns of 15.9% and 10.1%, respectively.

Pax Ellevate Global Women's Leadership Fund Individual Investor Class PXWEX seeks returns on investment that exceed the price and yield performance of the Pax Global Women's Leadership Index. The fund invests more than four-fifths of its assets in securities of the components of the Women's index, the likes of which may include American Depositary Receipts, Global Depositary Receipts and Euro Depositary Receipts.

This Zacks sector - Global-Equity product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

ANEFX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.81%, which is below the category average of 1.11%. The fund has three and five-year returns of 10.4% and 7.3%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Mutual Funds
Referenced Symbols: PXWEX , ANEFX , TSBRX




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