The ETF market continues to grow, with more and more investors interested in taking their equity investments a little more passively.
In the last few years, there has been an increase in the number of green and clean stock-market segments and sustainable ETFs. These types of ETFs are great for investors looking to put their money into companies with positive environmental or social impacts on society.
Although there is an abundance of different sustainable ETFs on the market, not all of them are worth your investment. If you’re interested in investing in a sustainable ETF, it’s important that you understand how to narrow down on one that ticks all your boxes.
To help you find the right sustainable ETF for your investment needs, we’ve put together this helpful guide on how to select a sustainable ETF.
Assess Your Personal Values
One of the first steps to choosing a socially responsible ETF is assessing your personal values. Not all sustainable ETFs are created equally. Some funds may focus on different aspects of sustainability than others, so it’s important to find one that aligns with your personal values.
For example, if you are very concerned about climate change and sustainability, you may choose a fund that focuses on sustainable energy.
What Companies Does the Fund Invest In
After assessing your personal values, you should evaluate what companies a sustainable ETF invests in.
The companies that a certain socially responsible ETF invests in can greatly impact the type of social impact it has. After all, sustainable companies that focus on renewable energy sources can do much more for the environment than fossil fuel-focused ones.
Be Aware of the Fees
Another thing to be aware of is the fees associated with the fund. While you want to find a sustainable fund that invests in the companies you feel aligned with, you don’t want to choose an expensive one.
There are various sustainable ETFs on the market, and each has a different fee structure. Some sustainable ETFs have higher management fees than others, which means you may not get as much money to put towards your cause.
It’s also important to remember that the fees may change over time, so it’s important to reevaluate them regularly.
Work With an Investment Broker
After you’ve evaluated a few funds and found one that meets your personal values, you can then look into working with a financial advisor or investment broker.
Working with a broker can help you select a sustainable ETF for your needs and goals. It’s important to note that while many brokers offer a variety of sustainable funds, not all have a strong understanding of what makes a sustainable fund valuable.
Ensure that the one you hire has experience with sustainable funds and a strong grasp of what makes a good sustainable ETF.
The Bottom Line
Sustainable investing is a growing trend among investors who want a more socially responsible portfolio. As such, several different sustainable funds are worth exploring, but not all are created equally.
To select a sustainable ETF that fits your investment needs, you’ll first need to assess your personal values. From there, you can evaluate what companies the fund invests in and what fees it charges.