Putting together an all-green portfolio is easier today than it has ever been. It’s all thanks to the formation of sustainable funds that let you dip your investments into a selection of safe and sound investment options that benefit the world and the people in it. There are lots of well-performing sustainable funds to be a part of too.
Impact investors are very lucky as they don’t need to do heavy research anymore. There’s a wealth of sustainable funds to consider getting ASAP. Here at the Decent Investor, we’d love to give you the best of the best so we’ve located the best sustainable funds to get into right now.
Before we give you a list of the best sustainable funds, here’s what a sustainable fund is first:
What Is A Sustainable Fund?
Sustainable funds can be defined through two lenses:
Firms will analyze a company’s performance in terms of environmental, social, and governance (ESG) criteria. These are done and then analyzed along with traditional factors such as valuation and profit growth.
Most sustainable funds include social impact-based investments using environmental, social, and corporate governance criteria.
This is related to his ESG ratings discussed in this guide. The sustainable investment fund in question may be focused on a particular theme, such as a particular industry or company that consciously wants to have a measurable social impact.
There is definitely an ethical component to sustainable index funds.
For example, there is an understanding that investors can influence the development of a low-carbon and inclusive global economy. Sustainable investments are becoming more and more popular due to the growing need for social and environmental change.
This pattern does not appear to be slowing down, so sustainable investors can expect the number of such funds to increase over time.
ESG, like socially responsible investing, has moved from fringe to mainstream over the past decade.
Investors and businesses are hearing a general call for transparency, increased regulation and better standards. More of these types of funds have been launched in recent years.
Human conscience plays a role in shaping a sustainable future. Investors understand that actually have a chance in changing the world. These same people want to be more socially conscious and more environmentally conscious.
The more popular they are, the more likely it is that sustainable mutual funds will benefit those who buy and trade them.
The company’s commitment to maintaining decent working conditions for employees is a must. Of course, company’s should also showcase a commitment to diversity and equality. Companies that take note of these have good ESG track records.
The Sustainable Investment Fund is something to consider when considering adding to a portfolio for those interested in both financial performance and social responsibility.
Investors looking for a sustainable fund and also interested in future digital assets should consider IMPT. This platform is just one part of a system that’s built on blockchain. In fact, IMPT is even gearing up to sell a unique native crypto token is.
According to its white paper, the project has already attracted more than 10,000 established retailers to join the cause for a more sustainable future. These include companies such as HP, Apple and Microsoft. There are even fashion brands such as Boss, Topshop, Chanel, and Hermes.
IMPT is devoted to decreasing and eventually offsetting the effects of global warming. It provides incentives to those who are reducing their carbon footprint. Carbon credits are created with NFTs. In other words, the ownership and sale/transfer processes are facilitated through the blockchain by IMPT.
Almost everyone is invited to use the platform. Individuals, governments, social organizations, manufacturers, and other businesses – you name it. The platform works with a simple points system, making it easy for anyone to measure their carbon footprint. It also ranks individuals and companies depending on the percentage of their carbon footprint offset by their activities. IMPT Digital Tokens can be purchased with either fiat currency or supported crypto assets. As mentioned above, you can use your IMPT tokens to get a hold of Carbon Credit NFTs.
Eventually, the NFTs can be traded through the platform’s marketplace. Additionally, you can earn crypto by shopping through IMPT’s storefront.
This BlackRock sustainable fund aims to track the performance index of global clean energy stocks and bonds.
The portfolio includes nearly 100 stocks focused on making a positive impact for the benefit of future generations in the world. Specifically, iShares Global Clean Energy invests in companies that work with biofuels, geothermal, wind, hydropower, ethanol and solar sectors of the global green power sector.
Additionally, iShares Global Clean Energy owns a company that manufactures the equipment and tech used for the process. The Index Committee selects the Fund’s holdings, all of which must meet strict criteria.
The iShares Global Clean Energy Fund is measured by market capitalization and engagement score under a set of constraints. It is reorganized every two years. Additionally, the ETF is arguably one of the best and biggest sustainable funds on this list. iShares Global Clean Energy holds 98 shares with a net worth exceeding $5.7 billion.
According to MSCI Sustainable Fund analysis, 38% of the BlackRock Sustainable Energy Fund investments usually have an ESG rating of AAA or AA. Only 5% are rated B or CCC. This fund was established in 2008. While this sustained fund’s performance looks less appealing on the chart above, it is up about 147% over a shorter five-year period.
Fidelity Sustainable Mutual Funds like FITLX are potentially beneficial to investors interested in socially or environmentally responsible companies. Bear in mind that the Fidelity US Sustainability Index Fund only holds funds that have a strong MSCI ESG rating. The benchmark for this fund is the MSCI USA ESG Leaders Index.
The companies that are a part of this US-focused Fidelity Sustainable Fund are diverse in rating and weighting and consist of large and mid-sized US companies. To be a part of this esteemed portfolio, companies are required to be both environmentally and socially responsible. Below are just a few of the shares that you can find in this sustainable mutual fund.
- Alphabet (Google)
- Johnson & Johnson
This fund has 25 positions. Overall, 51% of Fidelity Sustainable Fund portoflio have an MSCI ESG rating of AAA or AA. Even better is that none of them are rated B or CCC. When it comes to performance, the fund was established around 2017 and is up over 72% this year.
The First Trust Water ETF is rated against the ISE Clean Edgewater Index. Therefore, it remains to be the most popular sustainable ETFs offering investors a way to combat drinking water shortages.
That said, the scarcity of clean water is a prominent problem in a few parts of the world, which is why the companies at this sustainable fund want to help solve the problem. The need for more sustainable sources of drinking water can help bring forth the growth of the companies in this fund.
The list of holdings of this sustainable fund includes:
- Dana Harcorp
- Agilent Technologies
- IDEXX Laboratories
- American Water Works
We have listed the top 6 stocks by fund holding ratio. Overall, 49% of First Trust Water’s holdings constantly have an ESG score of AAA or AA, and 2% have a B or CCC, according to the MSCI Sustainable Fund Ratings. The fund has 36 companies and a net worth of $1.26 billion. This includes sectors such as industry, technology, utilities, and healthcare.
These companies generate revenue by providing solutions that involve filtration, infrastructure, water testing, water distribution, treatment, and pumps, to name a few. The fund does have a very strong track record and is well-positioned because of its portfolio of carefully selected companies.
This should help the planet reduce the harmful effects of pollution, population growth, and global warming. The First Trust Water Fund was launched in 2007. First Trust Water has gained nearly 80% in its trading over the past five years.
This is it if you’re looking for one of the most sustainable funds on the market for those interested in US green mutual funds and energy companies. First Trust NASDAQ Clean Edge Green Energy has a sizeable portfolio of publicly traded renewable energy companies.
An eligible US company must be operating in one of the four core subsectors of sales, manufacturing, development, or installation. This also allows for energy storage and conversion, including hybrid batteries.
First Trust NASDAQ Clean Edge Green Energy holdings also include holdings in that are within the sustainable energy intelligence industry which includes niche tech such as smart grids. It also includes advanced materials that reduce the need for petroleum products and enable clean energy and renewable power generation (wind, solar and geothermal).
Here’s how First Trust ranks NASDAQ Clean Edge Green Energy. 14% of the Sustainable Index Fund’s holdings have an ESG rating of AAA or AA, while only 3% have a B or CCC rating.
This trust fund was first released in 2007. This sustainable investment fund grew 254% in the five years before this guide was created.
The Global X Cleantech ETF aims to track the price and return performance of the Indxx Global Cleantech Index, before any fees or charges. In short, the Global X Cleantech ETF hopes to fund companies that have benefited from the increased use of technology to prevent or mitigate negative environmental impacts.
This includes companies involved in improving the energy efficiency of homes and businesses, as well as companies that specialize in generating renewable energy. Global X CleanTech’s other interests focus on manufacturing and locating goods and services that reduce pollution, as well as the deployment of smart grids.
The CTEC Fund’s net assets are only $124 million. Nevertheless, 22% of the holdings in the CTEC portfolio are given an ESG score of AAA or AA. Currently, 9% of the stocks in this investment are rated with B or CCC.
Global X CleanTech ETF was listed in. It’s up just over 10% since its inception which makes it one of the best-performing sustainable funds out there.
Established in 2001, the BGF Sustainable Energy Fund invests a whopping 70% of its assets internationally. Some of the high ESG score companies included in this fund are working to provide clean and alternative energy technologies.
This includes not only renewable energy technology providers and developers, but also infrastructure, alternative fuels and energy efficiency providers and developers.
This sustainable BlackRock fund consists of 49 positions. Research reveals that the fund’s holdings have an average ESG score of B or CCC. Moreover,56% are rated AAA or AA. Moreover, it is a good example of one of the largest sustainable funds, especially since it has a net asset value of over $6.3 billion.
This fund complies with the Global Industry Classification Standards. In other words, we do not invest in companies that fall into a particular industry classification. This includes all companies focused on oil and gas or coal and consumables exploration and production.
It is one of the more established sustainable funds out there so it’s more stable than the rest.
Should You Get A Sustainable Trust Fund?
Say you’re really vested in getting into sustainable investing, the big question now is whether this is something that’s best for you. Bear in mind a few things.
A trust fund like this isn’t something that will help get you rich overnight. However, it’s something that can get you a sustainable form of extra income long-term. With patience and the right choices, you can get a trust fund that will net you a sustainable amount of wealth in the future.
The purpose of impact investing is to make sure that your choices don’t just affect you, it should also affect the world around you. Finding sustainable trust funds is a good way to make sure that your investment choices are going to make a significant impact in the world.