ESG Investing

Advertisements
Photo by Algi on Unsplash

The past few weeks have been special for the Abrahamic traditions. Christians celebrated Easter (Orthodox Easter a week later), Jews celebrated Passover, and Muslims observed Ramadan and Eid. Recently, there seems to be an assault on women’s reproductive rights. Religion, environmental sustainability, corporate governance, and societal concerns, are very important to people’s value systems. It’s important to many that their investments reflect their beliefs. Sometimes it feels like investing and our values are incongruous. However, there is a way to invest and stay true to your values whether they be religious, environmental, social, governance or otherwise. It’s called ESG investing.

Advertisements

Having a Muslim upbringing, I am very aware of some of the predicaments investing can present. Muslims are not allowed to charge or earn interest; further, it’s dubious to invest in companies that do. Also, investing in companies that produce tobacco, alcohol or pork products is prohibited. Finding a “halal” investment for Muslims can be tricky. Muslims aren’t the only religious group with investing predicaments.

When Broad Market ETFs are Problematic

Beyond the prohibitions Muslim investors face, investors with other religious, environmental, social or governance concerns may also have certain red lines. Investing in a fund like VTSAX (which essentially invests in all funds of the market) might feel like you have to put your values aside in order to invest. However, you don’t have to feel this way.

Advertisements

ESG (Environmental, Social and Governance) Investing could be a good way to help those with various concerns invest without the guilt. These funds have been developed to adhere to the various values investors may have. These funds can be actively managed or based on an index. Some ESG funds exclude companies that don’t meet an ESG requirement or threshold whereas other funds seek out companies with ESG missions to invest in. Some ESG funds zero in on issues such as gender equity in the workplace and others that have broader standards.

These funds were created to offer a way for people to invest their money where their hearts are. There are funds out there now that will keep your investments out of problematic companies. These companies include oil, weapons manufacturers, and tobacco, and alcohol for example. Other funds will only include companies that align with various religious principles, low environmental impact standards or that champion racial or gender equity.

The peace of mind price

Below are some ESG funds I’ve researched. Overall, these funds do have higher fund fees. The returns are good – or, at least not too far off from what investing in the broad US market would return.

Advertisements

For perspective, I recommend investors look for funds that have overall expense ratios of 0.25% or less. Preferably less. Over the last ten years the stock market has returned an average of 16.98%. Not all the funds below are going to be at 0.25% or less in expenses. Some funds below have returned less than what the overall market returned. The reason I’m listing these funds is that investing and feeling good about your return is important. If investing in funds or companies that align with your values motivates you to invest, then spending a little more in fees towards ESG investing is perfectly rational and makes complete sense.

Advertisements

Below are the tickers of the funds/companies and their names. I explain what the mission and/or strategy of each fund is. I’ll list the fees associated with the fund and how the fund has done over the last 10 years (or since the fund’s inception). I’m also going to point out some companies I invest in that I believe will provide an excellent return and are also ESG-orientated.

The Halal Fund; AMAGX

AMAGX is the largest halal ESG Fund and it’s done very well. Over the last ten years (as of March 31, 2022) its average total return has been 15.16%.

Advertisements

This fund invests only in common stocks, including foreign stocks. Investment decisions are made in accordance with the following Islamic principles:

  1. Investors share in profit and loss.
  2. No usury or interest is paid to investors. Further, the fund does not make any investments that pay interest.
  3. The fund does not invest in businesses that are prohibited by Islamic principles. Some of the businesses not permitted are alcohol, pornography, insurance, gambling, pork processing, and interest-based banks or finance associations.
  4. Islamic principles discourage speculation, and the fund tends to hold investments for several years.

The fund charges a .95% fee (ouch). It’s a hefty fee; however, there is no minimum investment for tax sheltered accounts and a $250 minimum otherwise. This means that for every $10,000 invested, a $95 fee is charged. As a comparison, VTI, the Vanguard ETF that tracks the entire US stock market, charges .03%. That’s $3 for every $10,000 invested. I am very anti-fees; however, for many, investing and keeping true to values is difficult to do; paying a higher fee for guilt free investing is worth it if it’s important to you.

Gender Equality Funds; SHE & PXWEX

Women’s leadership and gender equity are values some funds focus on. Photo by Christina @ wocintechchat.com on Unsplash

If investing in companies that champion gender equality is important to you, I have two funds for you to consider. I like the lower cost of SPDR® SSGA Gender Diversity Index ETF (Ticker: SHE). The well roundedness and focus on female empowering companies of the Pax Ellevate Global Women’s Leadership Fund (Ticker: PXWEX) is excellent.

Advertisements

SHE focuses on these ratios for companies in its fund holdings:

  1. Female executives and female members of the board of directors to all executives and members of the board of directors.
  2. Ratio of female executives to all executives.
  3. Ratio of female executives excluding executives who are members of the board of directors to all executives excluding executives who are members of the board of directors.

This fund’s focus is on gender diversity primarily within the executive branches or a company. Companies in this fund are part of it because they have better than average diversity in its upper ranks. The expense ratio for this fund is 0.20%. It has a return of 10.83% over the last five years as of March 31, 2022.

Advertisements

PXWEX

The Pax Ellevate Global Women’s Leadership Fund is a pretty neat fund if you want to invest your money into companies with the highest ratings of:

  1. Women represented on the board of directors.
  2. Women represented in executive management.
  3. The hiring, promotion and retention of women.
  4. Gender pay equity.
  5. Proactive gender goals and targets and/or have signed on to the Women’s Empowerment Principles.
  6. Transparency in gender diversity data.

PXWEX has an expense ratio of 0.78% (once again, ouch). It has an average ten year return of 9.59% as of March 31, 2022. There is an initial $1,000 buy in for investor class shares.

Advertisements

Although this fund is a leader in women’s leadership investing, it doesn’t stop there. It also ranks high for excluding companies that are not environmentally conscience, or deal in fossil fuels, tobacco, civilian firearms, and military weapons. PXWEX does get a “C” ranking for the prison and borders industrial complex. This is according to the Gender Equality Funds ranking site.

Environmentally Conscience Funds

If protecting the environment is important to you then ERTH is a fund you should investigate. Photo by aisvri on Unsplash

Want to invest in companies that are trying to save the planet? Invesco MSCI Sustainable Future ETF, Ticker: ERTH could be a good option. This fund invests in companies globally and includes companies that efficiently use limited natural resources. Further, companies in this fund have to earn more than 50% or more of their revenues from “Environmental Impact.” This means that the revenues come from alternative energy, energy efficiency, green building, sustainable water, pollution prevention and control, as well as sustainable agriculture. Further, it screens companies to make sure they are not caught up in environmental controversies. Companies must also include sustainable impact metrics as part of their business strategy. The fund has a decent management fee of .55%. It’s 10 year annualized returns are 11.42%. That’s not a bad price to pay to keep your investments green.

Advertisements

ESG-minded companies to invest in

We invest in three companies that have taken a stand for women’s rights. I also like these companies because of their business models. Salesforce (CRM), Amazon (AMZN) and Apple (AAPL) are three tech companies that have been beaten up lately due to increasing inflation and interest rates. However, these well run companies produce highly sought after products and services. They’ll be very good investments long term.

Advertisements

In light of the recent attacks on safe abortion access in the Unites States of America, Apple and Amazon announced they would help their employees pay for expenses related to travel for reproductive healthcare, including to get an abortion. Salesforce stated it would help its workers move out of Texas in light of that state’s new abortion law in order to seek reproductive healthcare they need.

Other pro-choice companies to consider

We don’t have direct investments in the following companies but they have also taken a stand for women’s rights. Levi’s (LEVI), Citigroup (C), Yelp (YELP), Match.com (MTCH) and Bumble (BMBL) have also pledged to cover the travel costs of employees who would need to travel to seek out abortion services. Lyft (LYFT) and Uber (UBER) have pledged to provide women in Texas and Oklahoma free travel to abortion services. They will also pay for any legal services their drivers may face in transporting women to these services. Webhosting company GoDaddy (GDDY) booted Texas Right for Life after the site started encouraging users to send in anonymous tips regarding violations of the new anti-abortion Texas law. The law passed in Texas allows for lawsuits to be filed against providers of abortions.

Advertisements

I am pointing out these companies because I tried finding a fund that holds companies that support women’s rights and a woman’s right to choose. I couldn’t find one. If you know of one, please add a comment letting us all know of it.

For a company to be public about their support of women’s reproductive rights, well, it’s not common. These companies have the courage to stand up for women’s rights and they deserve to be credited for their efforts.

Advertisements

Invest in your values

Investing doesn’t mean having to compromise your values. ESG investing will help you align your dollars with your values, whatever they may be. Make sure to research funds and companies before you invest in them. If you find interesting funds you’re excited to invest in, please let us all know about them in the comments section below.

As always, good luck! Investing can be daunting and I hope this post makes it a little less so.

Good Luck!

Mrs. Moneyaire