While the demand for sustainable and responsible investing is growing, there’s still some confusion among investors over which funds truly incorporate environmental, social and governance principles. While Morningstar reports that U.S. sustainable funds grew by nearly $70 billion in 2021, up 35% from 2020, the financial research and analysis firm removed the ESG tag from 1,200 funds, representing over $1 trillion, after finding that they weren’t delivering on stated ESG goals.
To increase individual investors’ awareness and ability to address climate change through sustainable investing decisions, online investment advisor Carbon Collective has released its Ultimate Guide to Sustainable Investing. The guide seeks to provide a concise roadmap for investors interested in sustainable investing and explain why such investment is critical to solving climate change, why investments like retirement accounts matter, and how to analyze the existing ecosystem of options and differentiate the truly green from the greenwashed.
“We know what we need to do to accelerate the energy transition: divest from fossil fuels and reinvest in climate solutions and renewable energy,” said Zach Stein, co-founder of Carbon Collective and the primary author of the guide. “The recent IPCC report confirms the urgency of this action."
Added Stein: “Not only do we provide great detail in the guide for thinking about education, but we provide data tables that show that most sustainable portfolios available to retail investors don’t deliver on the promise of being truly sustainable."
For investors wishing to invest more responsibly, Avantis Investors launched three socially responsible investing ETFs in March: the Avantis Responsible U.S. Equity ETF (AVSU ), the Avantis Responsible International Equity ETF (AVSD ), and the Avantis Responsible Emerging Markets Equity ETF (AVSE ).
AVSU invests in a broad set of U.S. companies across all market capitalizations and is designed to increase expected returns by overweighting securities that the firm believes to be trading at lower valuations and with higher profitability ratios, according to the firm.
AVSD invests in non-U.S. developed countries across all market capitalizations and, similarly to AVSU, is designed to increase expected returns by overweighting securities that the firm believes to be trading at lower valuations with higher profitability ratios.
AVSE invests primarily in a diverse group of non-U.S. companies across countries, market sectors, and industry groups, and may invest in companies of all market capitalizations. The portfolio management team limits its investable universe of companies by screening out those that raise concerns based on the team’s evaluation of multiple ESG metrics.
The three responsible ETFs apply the financial science-based approach used across all of Avantis’ investment strategies together with ESG considerations to create well-diversified portfolios that can help investors achieve their investment goals. Each fund takes a proprietary systematic investment approach that combines the latest in financial science with common sense investment principles.
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