Mutual Funds

32073449_mInvestors have traditionally considered only one criterion when making an investment, financial return. In contrast, “socially-responsible investing” considers whether an investment maximizes financial return as well as environmental welfare, social justice, and ethical corporate governance.[1] Socially-responsible investing consists of both avoiding investments in companies that do harm and actively investing in companies that have a positive social-environmental impact. Investments of this type are intended to incentivize corporations to adopt sustainable and just practices. Only 18% of managed assets in the U.S. are invested with social-environmental criteria, compared to 59% of assets in Europe.[2]

Many socially-responsible mutual funds are available, though they differ in their focus and, naturally, their rate of return.[3] If your investments are limited primarily to your pension account, ask your investment firm and employer to provide access to a socially-responsible mutual fund.

Top Mutual Funds

We searched for socially-responsible mutual funds with positive investments in the areas of climate and clean energy technologies as well as pollution management or product toxicity. In addition, we identified funds with several restrictive criteria that preclude investments in the top 200 oil, gas, and coal companies. Funds were also eliminated from our consideration if they were indifferent about companies using animals in product testing, producing weapons, or manufacturing tobacco products. Finally, only funds with a favorable 5-year rate of return of at least 14% were selected.

Three funds remained once we applied our criteria: Green Century Balanced, Pax World Fund, and Porfolio 21.

Green Century Balanced

  • Makes positive investments in the areas of renewable energy, pollution prevention, eco-friendly products, organic foods, and green community development.
  • Does not invest or limits investing in companies engaged in nonmedical animal testing, companies supporting the production of nuclear weapons, and companies supporting the production of tobacco products.
  • Five-year rate of return: 14.69 percent

Pax World Global Environmental Markets Fund

  • Makes positive investments in the areas of renewable energy, pollution control, community development, human rights, and labor relations.
  • Does not invest or limits investing in companies that engage in animal testing, manufacturers of weapons, and manufacturers of tobacco products.
  • Five-year rate of return: 19.12 percent

Portfolio 21

  • Makes positive investments in areas of renewable energy, non-toxic substances, community development, human rights, and labor relations.
  • Does not invest or limits investing in companies engaged in animal testing, manufacturers of weapons, and manufacturers of tobacco products.
  • Five-year rate of return: 15.64 percent