When it comes to being a socially conscious consumer, I’m constantly trying to strike a balance between being budget-savvy and syncing my values to my spending. While I ‘m apt to splurge on groceries by shopping locally and buying organic, I save by volunteering at my neighborhood time bank (where you barter services and goods for service hours), shop secondhand and concoct my own household cleaners.
Lately I’ve been curious about how to be a socially conscious capitalist as an investor. Here’s the thing: While many investment apps give you the option of investing in stocks in ETFs (diversified bundles of stocks that combine low costs with high growth) you may be left wondering about the ethics and business practices of the companies you’re investing in. How can one invest in companies that are both profitable and speak to their values? Can you invest and grow your savings without inadvertently supporting, say, sweatshop labor?
Enter impact investing. The concept of socially and environmentally responsible investing has been picking up steam in recent years. The cool thing is that impact investing or sustainable, responsible, and impact investing (SRI), which used to be available only for institutional investors like banks and pension funds, is now accessible to everyday investors like you and me. SRI is catching fire.
In fact, it’s grown tenfold over the past 20 years, and at the end of 2015, $8.72 trillion, or every $1 out of every $5 that falls under professional management in the U.S. was invested with SRI strategies. Both BlackRock and Goldman Sachs have impact investment arms, which is a sure sign that the trend is catching on. It’s not hard to see why. A recent report reveals that 73% of millennials are willing to pay more for a product if it’s from a sustainable brand.
A new batch of startups is making impact investing—without sacrificing investment return—more accessible than ever. But beware: Investing ethically may cost a bit more than mainstream alternatives. Here are some investing options for making sure your money grows while aligned with what you care about most.
As the name suggests, Motif features themed portfolios centered around trends and ideas. It features "impact portfolios" such as "Sustainable Planet," "Fair Labor" and "Good Corporate Behavior." Motif has a robust selection of themed portfolios to choose from (to date, 146 professional motifs and 13,976 community-created ones), such as "Beat Cancer," "Cleantech Everywhere" and non-impact investing portfolios, such as "Online Gaming World" and "Cyber Security." If you’re feeling confident, you can also create your own motif.
What I like about Motif is not only the variety, but also that you can easily see which motifs are the top performers, most purchased and yield the highest dividends. For instance, "Battling Cancer" was a top performing portfolio in the past year, with a mega return of 77.3% in the past year, compared to the S&P 500’s annual rate of return of 8.79%. The portfolio "Online Gaming World" (not an impact investment, by the way), had a 74.2% return in the past year.
However, there is there is a lot to choose from — Motif touts more options than investment apps geared toward newbie investors such as Acorns and Stash. You’ll have to know investing basics and it wouldn’t hurt to have some investing experience under your belt.
When it comes to pricing, it costs $9.95 to buy or sell a motif. The minimum investment for a motif starts at $250. You can also trade individual stocks and ETFs for $4.95 per trade. Motif offers subscriptions for managed accounts for $9.95 per month on accounts under $100,000, and $19.95 on accounts over $100,000.
This model becomes more attractive if you have a lot to invest. With $10,000 invested, there is a 1.2% annual management fee—much higher than the 0.25% offerings from competitors like Betterment and Wealthfront. However at $100,000 it becomes just 0.12%—much lower than its competitors. Motif offers three types of non-retirement accounts for individuals, joint, and trusts, and three types of retirement accounts: Traditional IRAs, Roth IRAs, and Rollover IRAs.
Grow Invest focuses on socially conscious investments that are centered around environmental, social and governance principles (ESG). If you’re investing through Grow’s app, there’s a .25% management fee. So if you’ve invested $5,000, that’s $12.50 a year or $1.04 a month. Like other robo-advisors such as Betterment and Wealthfront, Grow also has a full-service wealth management arm: Grow Capital Management can help you create your own customized portfolio with minimal fees. It charges management fees between .25% and .75%, which are paid on a quarterly basis, and there’s no account minimum. (Update: Grow declined to comment on the current fee structure due to a forthcoming product launch.)
Wealthsimple, an online management investment service, now offers options for socially responsible investing. Wealthsimple offers six different impact investing ETFs: "CRBN," which are global stocks with a lower carbon exposure than the broader market; "PZD," which is essentially cleantech; "DSI," an ETF with socially responsible companies in the U.S.; and "SHE," with companies that achieve greater levels of gender diversity. There are also portfolios which include bonds, such as "BAB," which include companies issued by municipalities to support local initiatives; and "GNMA," which include securities issued by government agencies to promote affordable housing.
I was excited to hear the news that Wealthsimple had expanded to the U.S. earlier this year (and their services will be soon be available in the U.K.) What’s impressive with Wealthsimple is how specific these ETFs are. I’m particularly interested in SHE and GNMA, which are causes I care deeply about.
When it comes to fees, Wealthsimple charges .50% if you invest $5,000 to $99,999, and .40% if you invest over $100,000. This fee is quoted annually, calculated daily and applied monthly — you’ll see a small charge in your account every month. So if you invest $10,000 it’s $4.17 a month or $50 a year.
Having officially launched to the public this past spring, Swell is the newest kid on the block for impact investing. Swell features portfolios with high-growth companies for the socially-conscious-minded. Right now there are six portfolios to choose from: "Renewable Energy," "Green Tech," "Renewable Energy," "Zero Waste," "Clean Water," "Healthy Living" and "Disease Eradication."
You can poke around and take a gander at which companies are included in each portfolio. You can also see how each portfolio is performing against the Russell 3000, which is a market index that seeks to serve as a benchmark for how well the entire U.S. stock market is doing. Swell’s minimum initial deposit is $500. When it comes to fees, Swell charges .75% to invest in its portfolios. So if you invest $5,000, that’s $3.13 a month or $37.56 a year.
It’s really exciting that options exist for people who want to invest for the social good. Just keep in mind that unlike investment apps, such as Robinhood, Stash and Acorns, which are geared toward newbie investors and only require five bucks to get started, you may need a little more saved up to impact invest.
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