Is It Time To Cash In On Racial Justice Through Index Funds?

By Taylor Durham

  • OpenInvest created one of the first “racial justice” index tools, giving investors the opportunity to customize their portfolios based on metrics like diversity and social impact
  • By 2045, people of color will become the majority in the U.S

There are investment options out there that allow you to put your hard-earned savings to profitable use without sacrificing your values. Millennials are the first generation to effectively voice their concerns with their wallets, and are more likely than previous generations to take businesses to task over practices that harm the climate, deceptively target minorities, or worse. Here are some socially responsible investments that offer different ways of making sure you can invest profitably, but also with your conscience clean.

Why This Matters: The creation of a racial justice index may finally force companies to take stock in how to become more involved in the conversation or, at the least, address their lack of action. While large pension funds factor environmental, social and corporate governance, there’s still a desire for investing aligned with social issues.

OpenInvest, a fintech startup in the Bay Area is betting on impact investing, created one of the first “racial justice” index tools, giving investors the opportunity to customize their portfolios based on metrics like diversity and social impact. “There’s no mathematical justification for 20 million people to pile into the same cookie-cutter mutual fund anymore,” according to OpenInvest co-founder Josh Levin. “We’re optimizing the financial markets, in real time, for your goals and your values.”

Fueled by academic research, OpenInvest has started to divest from organizations plagued by diversity controversies. Companies like Google (GOOG +0.82%) and PepsiCo (PEP +0.99%) ranked in its top 10 where McDonalds and Walmart ranked in the bottom 10. Still, the data is far from perfect as companies don’t always report their progress or hit their projected goals.

Here are a few other socially responsible index funds to put on your radar:

  • 1919 Socially Responsive Balanced Fund (ticker: SSIAX): As the name hopefully implies, the Socially Responsive Balanced Fund is not just a simple overlay to the typical large-cap index and instead looks to provide a balanced but socially responsible approach to investing.
  • iShares Global Clean Energy ETF (ICLN): If you care most about climate change and want to make sure your portfolio is investing in the companies building our clean energy future, then ICLN is for you. 
  • Vanguard FTSE Social Index Fund Admiral Shares (VFTAX): If you’re concerned with female representation on corporate boards or human rights issues then this may not be the best fit for you, but it’s a simple and popular way to skew your investments toward a more socially conscious strategy.

Situational Awareness: These funds have the ability to completely change the way people invest, putting pressure on companies practicing bad-faith policy. In a digital era where controversial news spreads like wildfire, companies should be conscious of creating best practices for giving minorities a seat at the table, or risk alienating potential investors and losing revenue in the long run.  

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