- Robo-advisers have empowered a whole new generation of consumers to enter the investing market — and facilitated the rise of socially responsible investing (SRI), also known as impact investing.
- SRI portfolios include companies that either follow certain guidelines or address different social issues, such as climate change or pollution reduction
- Apps like Betterment, Ellevest, and Wealthsimple allow investors to tweak their portfolios and allocate more funds to particular causes, such as climate change, corporate governance, human rights, gender equality, and animal welfare.
- Ready to get started with impact investing? Signing up with Betterment, Ellevest, or Wealthsimple is easy »
Becoming an investor has never been easier. These days, it can be as simple as opening up an app or logging into a trading account to start investing, bringing financial services to a whole new generation of on-the-go digital-natives.
The app-ification of investing has been a great boon for consumers, and robo-advisers are one of the most useful tools to hit the market. Robo-advisers are cutting-edge platforms that provide automated, algorithm-driven financial planning services without the need for human supervision. This not only streamlines services, but provides them at lower fees.
The robo-advising phenomenon has facilitated the creation of some very specific investment niches, including, most notably, socially responsible investing (SRI).
SRI — also know as impact investing — is the practice of investing in companies that operate according to certain ethical guidelines, or provide products and services that either follow certain guidelines or address different social issues, such as climate change or pollution reduction.
Companies that create clean energy technology, provide affordable housing, or innovate in the field of human health could all be part of socially responsible investing portfolios, but so could companies that have progressive gender and diversity hiring practices or pay fair wages.
At the same time, SRI portfolios and funds exclude companies that don’t meet set ethical guidelines, such as tobacco and weapons manufacturers.
Robo-advisers with SRI options are exactly what they sound like: automated platforms that allow investors to put their money specifically into companies that make the world a better place. Oftentimes the platforms even allow investors to tweak how much of their investment goes into specific causes or social issues.
Here are some of the best impacting-investing apps on the market:
Wealthsimple has only been around since 2014, but it’s quickly become the best on the market at matching investors’ personal preferences.
In addition to offering a highly specific SRI portfolio that allows investors to focus on issues like low carbon exposure, clean tech, and gender diversity, the platform also has a separate Halal portfolio that’s designed to be consistent with Islamic Halal principles.
Wealthsimple offers three kinds of SRI portfolio types: “conservative” focuses on investments in local initiatives and development of affordable housing, since these are both stable and low-risk funds; “balanced” offers an even 50/50 split between investments in funds and investment in stocks; and “growth” focuses on investments in more risky, but more socially impactful, sectors, such as low carbon exposure (comprising over 40% of the portfolio).
There is no minimum investment required to get started.
The whole investment industry is assumed to be “gender neutral,” but Ellevest recognizes that 86% of investment advisers are men who, on average, are 50 or older. So the defaults of this industry are automatically set by men’s salaries, career paths, preferences, and lifespans.
Ellevest is a digital investment platform that puts women first, tailoring all financial strategies to women’s salaries (which are often re-invested in family), gender, and lifespan (which is generally longer than men’s).
The company offers a number of options for SRI, including funds that invest in companies led by women or that have policies that advance women, and companies that provide community services, such as childcare or senior care.
The platforms offers 21 different asset classes to invest in, ranging from stocks and bonds to international and US real estate. There’s no minimum required to invest.
Betterment has emerged as the largest and most popular platform in the robo-adviser space, and the way it has embraced SRI is a good indicator of where consumer sentiment is heading.
There’s no minimum investment needed to get started, opening the door for anyone with a little extra cash to start planning for their financial future.
The way Betterment offers SRI is the same as the way it offers traditional portfolios, but adds more stock to the mix that meets certain governance, social, and environmental sustainability criteria, while eliminating stocks from some socially negative companies from your portfolio.
The platform limits SRI investing to only two types of assets: large-cap stocks based in the US, and emerging market stocks.
As the name indicates, Earthfolio is a robo-adviser that focuses entirely on SRI, and it may be the only robo-advising platform to do so. Far, far ahead of the curve, the company has actually been around since 2000, before impact investing was even a widely-known term.
Companies that are part of the Earthfolio portfolio must meet strict social responsibility criteria, but by no means do they have to be perfect. Earthfolio is looking for companies that “rise above their peers by demonstrating consistent ethical behavior.”
The platform only invests in sustainable funds that screen for 10 Environmental, Social, and Governance (ESG) criteria, including clean tech, fair labor practices, human rights, corporate governance, and animal welfare.
Unfortunately, the company does have a minimum investment of $25,000, so it is more suited for experienced investors or those with a lot of capital on hand.