Is Betterment's Socially Responsible Investing actually socially responsible?
Betterment has a new Socially Responsible Investing Portfolio option that includes a Broad Impact portfolio, Climate Impact portfolio, and Social Impact portfolio. A friend of mine asked me if it was any good, and this was the first I'd heard of it so I jumped at the chance to learn more. This is my disclaimer that I'm not a financial advisor, and the information below does not constitute financial advice.
I'm a person who enjoys researching this stuff for fun and because I think it's important to be aware. My opinions may change once I learn new information, and everything below is just that — an opinion!
In my mind, we can see Big Oil's impact through oils spills and polluted air, but it also lurks in the shadows, in places where you might not see it unless you're looking really closely. And one of those places is in things like investment portfolios.
So, whenever I screen for this type of thing I’m looking for companies that don't support any fossil fuel companies; and that's a hard thing to find although it's becoming a bit easier now. For me, full divestment from fossil fuels is key. So with that in mind, I tried to see how much the portfolios could be backed by companies with ties to fossil fuels.
I think doing the Socially Responsible Investing fund is good if you choose the Climate Impact or Social Impact portfolio. I would not choose the Broad Impact fund because it supports ESG funds on a wider scale and many ESG funds still have fossil fuel companies that are included in this portfolio.
The Climate Impact portfolio (scroll to C. Climate Impact portfolio) uses ETFs which are fossil fuel reserve free and invest in companies that have divested in fossil fuels. I plan on moving my funds to this Climate Impact fund myself soon.
The Social Impact portfolio is mainly comprised of ETFs as well, and they favor companies that are focused on diversity and inclusion. It looks like the broader ESG portfolio (which may include fossil fuel companies) would likely not be included in this portfolio so that’s good. There are additional costs associated with this investment fun though, and that’s explained here (scroll to D. Social Impact portfolio).
No matter what you choose, you’ll likely still be supporting fossil fuel companies in some way even by moving to this strategy, but it should be a move in the right direction, and that’s worth it! When we can vote with our dollars, we absolutely should.
You can see the full white paper here that tells a little more about each portfolio makeup and its potential / risks.
I'll likely be updating this post with new information as I learn more.
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If you're interested in investing, I can personally recommend Betterment, I've used it for a few years now and really like it. You can sign up for Betterment here. This is a referral link that gives you free investment management (no fees) on your first $5000 for one year, and gives me free investment management (no fees) for up to 17 months... that's a weird timeframe but I don't make the rules!
Resources for further reading
What is socially responsible investing and how can I get started?