YOU MAY HAVE NOTICED A FLURRY OF new investing products that link sustainably themed funds with donations to nonprofit groups, from the NAACP to the National Wildlife Federation to the Susan G. Komen Foundation. But before you invest in a mutual or exchange-traded fund tied to your favorite charity, make sure that it fits within your portfolio, meets your investment goals and truly delivers a benefit to the nonprofit group with which it partners.
When comparing these funds with competitors, “consider the fund donation to be the cherry on top, not the main driver of the decision,” says Jon Hale, global head of sustainability for investment research firm Morningstar. “Don’t be seduced into a fund that doesn’t further your financial goals,” he says.
And look beyond a fund’s donation to measure impact. Start by taking a hard look at its management company. Does it actively partner with the nonprofit group it benefits to bring about change? Is it voting shareholder proxies and filing shareholder resolutions to further the nonprofit’s cause? “ESG investing alone doesn’t create concrete, real-world impact,” says Leslie Samuelrich, president of Green Century Capital Management. “You need to pick funds that do shareholder advocacy.”
The concept of working hand-in-glove with nonprofits isn’t completely novel. Consider GREEN CENTURY BALANCED FUND (SYMBOL GCBLX), a member of the Kiplinger ESG 20, the list of our favorite stocks and funds with a focus on environmental, social and governance issues. Fund sponsor Green Century is owned by several nonprofit groups around the U.S., and its profits from fees support their environmental and public health goals.
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