Explore the World of Socially Responsible Investing with Betterment
If you’re interested in understanding the world of Socially Responsible Investing (SRI), you’re in the right place. Betterment has been at the forefront of SRI portfolio construction, offering innovative options that cater to investors looking to align their values with their investment goals.
Table of Contents
- Introduction
- How do we define SRI?
- The Challenges of SRI Portfolio Construction
- How is Betterment’s Broad Impact portfolio constructed?
- How is Betterment’s Climate Impact portfolio constructed?
- How is Betterment’s Social Impact portfolio constructed?
- Conclusion
Introduction
Betterment introduced its first Socially Responsible Investing (SRI) portfolio in 2017, and has since expanded the range of investment options under this umbrella. Our SRI offerings include a Broad Impact portfolio, as well as more focused options like the Social Impact portfolio and the Climate Impact portfolio. These portfolios are designed to provide diversified and cost-effective solutions using exchange traded funds (ETFs) that align with various ESG criteria.
How do we define SRI?
Our approach to SRI encompasses three key dimensions that guide our portfolio construction mandates:
- Reducing exposure to unsustainable activities and controversies
- Increasing exposure to solutions for environmental and social challenges
- Using shareholder engagement tools to incentivize responsible corporate behavior
We base our SRI mandates on ESG (Environmental, Social, Governance) criteria and expand upon this framework by incorporating shareholder engagement strategies.
Using SRI Mandates
Our SRI portfolios follow internally developed mandates that reflect sustainable investing objectives. By including these mandates in our portfolio construction process, we aim to enhance ESG exposure and promote socially responsible investing practices.
The Challenges of SRI Portfolio Construction
Building SRI portfolios comes with its own set of challenges, including:
1. Existing limitations in the SRI market
Many current SRI offerings lack diversification and fail to address engagement opportunities for ESG change. At Betterment, we strive to maintain global diversification while incorporating engagement-based socially responsible ETFs in our portfolios.
2. Integrating values into ETF portfolios
Different investor expectations regarding the exclusion of specific companies pose challenges in SRI portfolio construction. Betterment offers three SRI portfolios to cater to varying ESG priorities, ensuring a balance between environmental, social, and governance considerations.
3. Liquidity limitations in SRI-oriented ETFs
While SRI-oriented ETFs have lower expense ratios, liquidity constraints can impact portfolio performance. Betterment regularly evaluates funds for inclusion based on liquidity and cost considerations in SRI portfolios.
How is Betterment’s Broad Impact portfolio constructed?
Our Broad Impact portfolio invests in socially responsible ETFs that align with ESG and engagement mandates. By maintaining geographic and asset class diversification, this portfolio offers a balanced approach to SRI investing.
How is Betterment’s Climate Impact portfolio constructed?
The Climate Impact portfolio focuses on environmental sustainability by investing in ETFs that target carbon footprint reduction, fossil fuel divestment, and green financing. This portfolio aims to provide exposure to climate-conscious investments while ensuring proper diversification and cost considerations.
Positive Impact on Climate Change
The Climate Impact portfolio includes ETFs that support lower carbon footprint companies and exclude fossil fuel reserves, contributing to climate advocacy and green solutions. By investing in these funds, investors actively promote environmental responsibility.
How is Betterment’s Social Impact portfolio constructed?
Our Social Impact portfolio emphasizes social equity by investing in ETFs that focus on gender equity, racial equity, and shareholder engagement. This portfolio is designed to promote diversity and inclusion in investment practices.
Promoting Social Equity
Through specific ETFs targeting gender and racial diversity, the Social Impact portfolio aims to advance social equity and inclusion. By allocating to these funds, investors support companies with strong diversity and equality policies.
Conclusion
Despite the challenges faced in SRI portfolio construction, Betterment remains committed to supporting investors in aligning their values with their investments. We continue to enhance our SRI offerings and prioritize socially responsible fund selection to cater to evolving investor preferences.
Embrace the world of Socially Responsible Investing with Betterment and make a positive impact with your investment choices!