Choices for Social Investment ETFs - dummies

By Russell Wild

If you decide that you want to be a socially responsible investor, you have many choices: About 110 mutual funds and two dozen ETFs now invest with some social screen. The growing number of ETFs designed to appeal to your conscience spans the spectrum from U.S. to foreign to global (foreign and U.S. combined).

There are ETFs that emphasize environmental awareness, social responsibility, clean energy, religious values, and more. Here are just a handful of examples:

  • ETFs focused on social issues: Among domestic ETFs aiming to show commitment to broad social issues are these:

    • iShares KLD 400 Social Index ETF (DSI)

    • Pax MSCI North America ESG Index ETF (NASI)

    For the same kind of stock exposure on the international side, you find:

    • Pax MSCI EAFE ESG Index ETF (EAPS)

    Funds that invest in global stocks focused on clean energy include:

    • Market Vectors Global Alternative Energy ETF( GEX)

    • Guggenheim Solar ETF (TAN)

  • ETFs focused on religious values: If your social conscience is tied to the New Testament, then FaithShares has an ETF for you: the FaithShares Christian Values ETF (FOC). No gambling. No pornography. No stem cell research.

    Until recently, FaithShares had individual ETFs that attempted to allow you to invest according to your specific brand of Christianity, whether you were a Baptist, Catholic, Methodist, or Lutheran; these funds have all closed shop.

    In June 2009, a company called Javelin introduced the Javelin Dow Jones Islamic Market International Index Fund, which avoided investing in companies involved in alcohol, gaming, weapons production, and pork products. The ETF failed to attract much in the way of investor dollars and so closed down a little more than a year later.

    Anyone seeking investments that conform to Islamic principles can still pursue that objective via mutual funds offered by Amana Mutual Funds Trust.

Reasonable people can sometimes disagree on the specifics of what is and is not socially responsible corporate behavior. If you decide to invest in an SRI fund, you should to review a fund’s statement of values before investing. Otherwise, you could end up investing at cross purposes with your own values.