4 Best Robo-Advisors for Socially Responsible Investing
Written by Kevin Mercadante | Modified date: October 31, 2019
Robo-advisors are an easy and convenient way to take advantage of conscience-based investing. Here are our top four robo-advisors for socially responsible investing.
The robo-advisor phenomenon has swept the investment world. As it has, it’s also been creating a number of very specific investment niches.
One that’s been on the rise in recent years—and works especially well with robo-advisors—is socially responsible investing, or SRI. For that reason, we’ve compiled the four best robo-advisors for socially responsible investing.
What is socially responsible investing (SRI)?
SRI centers on investing in companies that operate businesses with socially desirable products and services. It isn’t about investing strictly for social benefit, but rather investing in companies engaged in SRI that represent profitable investments. These can include areas like clean energy, affordable housing, or improved human health.
At the same time, SRI works to exclude certain companies or industries engaged in products or services that are deemed socially harmful. These can include tobacco, weapons manufacture, gambling, or adult entertainment.
SRI also involves Environmental, Social and Governance (ESG) considerations. Environmental centers on climate change, renewable energy, and sustainability. Social focuses on diversity, labor relations, and conflict minerals. Governance relates to management structure, board independence and executive compensation. It refers not just to what companies do, but how they’re run.
Why robo-advisors are perfect platforms for SRI
It can be extremely difficult for an individual investor to develop a portfolio comprised of SRI compliant companies. There are very few companies that are 100 percent compliant. What SRI attempts to do is to invest in companies that are more compliant than industry average. As well, with companies being so diversified with both product lines and geography, it can often be difficult to identify the most appropriate companies.
There have been mutual funds based on SRI investing for decades. But robo-advisors offer investors an opportunity to invest in a portfolio of either funds or individual stocks that generally meet SRI requirements. In fact, it’s possible to have a complete balanced portfolio with a robo-advisor that offers an SRI investment option.
As well, robo-advisors offer the same investor benefits on SRI portfolios as they do with general investing portfolios. That includes selection of your investment asset allocations, rebalancing your portfolio, reinvesting dividends, and doing it all at a very low fee. Many robo-advisors also offer tax-loss harvesting, which is an investment strategy designed to minimize the tax liability created by capital transactions.
As an investor looking to invest in an SRI portfolio, you can open an account with a robo-advisor which meets SRI criteria that will be fully managed for you. All you’ll need to do is fund your account.