An increasing number of people — both individuals and institutions — are investing using some kind of moral compass when deciding which ETFs deserve their attention. The investments chosen are screened not only for potential profitability but for social, environmental, and even biblical factors as well.
Some screens, for example, attempt to eliminate all companies that profit from tobacco or weapons of mass destruction. Others try to block out the worst-polluting companies, or companies that use child labor in countries that have no effective child labor laws.
The total amount of money invested in socially screened portfolios (which include more than 100 mutual funds, certain state and city pension funds, union and church monies, some university endowments, and, as of recently, two dozen or so ETFs) has grown from about $1 trillion in 1997 to an estimated $3 trillion or so today.
Many of the funds that call themselves socially responsible (otherwise known as SRI funds – the I stands for “investment”) not only invest with a purpose but also use their financial muscle to lobby companies to become better world citizens.
The movement’s greatest victory to date may have been the role it played in ending apartheid in South Africa. SRI seems to have had some impact on corporate America as well, most notably by pushing certain auto, oil, and utility companies to research ways to reduce emissions of greenhouse gasses.
Other victories include a nationwide ban on mercury thermometers and commitments from various corporations to start recycling programs, reduce toxic waste emissions, and end discrimination against employees based on their sexual orientation.