Saving for retirement is a necessity, although not everyone can afford to do so. If you have been blessed enough to be able to save for retirement, you might consider putting your money to work in support of social causes. Here are several easy ways to do just that.
The easiest way to save for retirement while doing good is to invest in a social impact or ESG (environmental, social, governance) fund. Unfortunately, the list of such funds is virtually endless, so it can be difficult to know where to put your money.
The best place to start is with the social values that matter most to you, which will then enable you to pick a social impact fund that aligns with those values.
Broad-based social impact funds
If you have a wide range of values and don’t want to target any specific areas of social good, you might consider a general ESG fund. The Vanguard FTSE Social Index Fund fits the bill. It tracks the FTSE4Good U.S. Select Index, which screens its constituents for common ESG criteria. There are plenty of well-known companies in Vanguard’s fund, which is also rather tech-heavy.
As of the end of September, the top 10 holdings were Apple, Microsoft, Amazon, Alphabet, Facebook, Procter & Gamble, Visa, NVIDIA, Tesla and Mastercard. The Vanguard FTSE Social Index Fund excludes companies that produce adult entertainment, alcoholic beverages, tobacco products, weapons, coal, oil, or gas, or gambling services. It also excludes companies that generate revenues from nuclear power production.
Those who want to spread their impact to companies around the globe might consider the iShares MSCI Global Impact ETF. This fund focuses on global stocks of companies that advance themes related to the United Nations’ Sustainable Development Goals, like climate change or education. The fund also targets companies with top ESG business practices that also build their business around goods and services which could drive positive change.
As of December 4, the ETF’s top 10 holdings were Tesla, Vestas Wind Systems, East Japan Railway, Umicore SA, Johnson Matthey PLC, Gilead Sciences, Kimberly Clark, Amgen, WH Group and Central Japan Railway.
Good for the environment
It’s never good to put all your eggs in one basket, so in addition to a broad ESG fund, you might also look at some that support specific values. If you’re concerned about the environment, the SPDR S&P 500 Fossil Fuel Reserves Free ETF is one good option. It’s operated by State Street, which is a reputable firm.
The ETF tracks the S&P 500 Fossil Fuel Free Index and allows investors who are concerned about the environment to invest in the S&P 500 without also investing in companies that produce fossil fuels. As of December 4, the fund’s top 10 holdings were Apple, Microsoft, Amazon, Facebook, Alphabet, Berkshire Hathaway, Johnson & Johnson, JPMorgan Chase, and Visa. Tesla will probably be added with a sizable weighting when it joins the S&P 500 later this month.
To get even more diversity, you might consider the Calvert Green Bond Fund, which focuses on bonds offered by companies and governments that are considered to be green. The fund is especially focused on renewable energy and energy efficiency, green buildings, and low carbon transport, although it also focuses on things like water management. As of the end of September, the bond fund’s top 10 holdings were the French Republic Government Bond OAT, Citigroup, Fannie Mae Aces, TerraForm Power, JPMorgan Chase, Owens Corning, City of San Francisco CA Public Utilities Commission Water Revenue, HAT Holdings, Digital Euro Finco, and Koninklijke Philips.
Other social issues
Although the environment is one of the more common social concerns catered to by social impact funds, there are other issues you might consider supporting. For example, the SPDR SSGA Gender Diversity ETF provides exposure to companies that have higher-than-average gender diversity within their upper management ranks. It’s also operated by State Street. As of December 4, the ETF’s top 10 holdings were PayPal Holdings, Texas Instruments, Visa, Johnson & Johnson, Walt Disney, Netflix, Nike, Intuit, Square, and Wells Fargo.
If you’re looking for an option that’s a little less conventional than the others on this list, you might consider the Reinvestment Fund, which received an A+ issuer credit rating by S&P Global Ratings. The Reinvestment Fund is a non-profit community development financial institution. It finances housing projects, educational programs, health care and job initiatives by assisting distressed communities.
There is a wide array of social impact funds to invest in. Before you put your money in any fund, it’s important to do some research so you can understand how they work, what you are paying for, and how much it costs.
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