NerdWallet: “Sustainable Investing: Easy Ways to Get Started”
May 17, 2021, NerdWallet — In today’s article by Alana Benson, she writes: “Investing in a greener planet and more equitable society sounds good on paper, but what does it mean in practice? Historically, adding sustainable investments to your portfolio was no easy task: Fees were high, funds were few and far between, and 401(k)s didn’t offer them.
“Now, fees have dropped, there are more sustainable funds than ever, and the Biden administration has announced that it won’t enforce a previous ruling that largely excluded environmental, social, and governance, or ESG, funds from 401(k)s.
“But the wheels of legislation and bureaucracy turn slowly, and it may be a while before sustainable investments are routinely available within workplace retirement plans. If you’re eager to get into sustainable investing, here are some ways to do it now.”
She turned to Marguerita Cheng, CFP® Pro, for insight into investing in ESG funds.
Rita explained: ESG funds are mutual funds that are graded using ESG principles. ESG funds invest in companies with business practices that allow them to have a sustainable and societal impact in the world. Some ESG funds are broadly focused, while others are fairly specific. For example, the SPDR S&P 500 Fossil Fuel Reserves Free ETF allows investors to invest in companies that don’t own fossil fuel reserves.
“Sustainable investors can really tailor their portfolios to their values,” Rita insists. “What may be socially responsible for one person may not be for another because this is very personal. So people have the ability to focus on issues near and dear to their heart, whether that’s gender equality, companies that provide domestic benefits, that champion LGBTQ communities, or that support Black Lives Matter.”
Rita also points out that ESG ETFs, or exchange-traded funds, have become more popular since they make sustainable investing more accessible and affordable than other types of mutual funds. ETFs can be traded on an exchange like a stock but offer the diversification of a mutual fund.