These ETFs aim to let you invest responsibly

Article Excerpt

Over the last few years, more and more ETF managers have launched funds focused on taking environmental, social, and governance (ESG) factors into account. Sustainable investing offers some investors a lot of conceptual and emotional appeal. But does investing in these kind of stocks hurt your portfolio returns? Yes and no. One way investing in sustainable ETFs can hurt performance is the ethical criteria used by some funds to select stocks could keep you out of promising investments with the power to boost your long-term portfolio returns. At the same time, their criteria may encourage the ETF managers to include stocks that score high in sustainabilty but lower in key financial measures. However, big institutional investors are increasingly seeking out companies with high ESG scores. That means that ETFs holding those stocks will gain—especially if they favour strong companies with sound prospects. Meanwhile, in the Supplement on page 70, we consider some of the latest studies on ESGs and look at the risks of…

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