Monday, July 24, 2017

Data show that socially responsible investments can outperform the S&P 500 index

See ‘Robo’ Advisers Betterment, Wealthfront Get In on Socially Responsible Investing: Betterment to use ETFs that track socially responsible indexes; Wealthfront will give clients flexibility to invest directly in stocks by Anne Tergesen of the WSJ.

Adam Smith's "invisible hand" suggests that if you follow your own self interest, you will promote the interests of society. It seems it works out here since investing in socially responsible companies seems to give a slightly higher yield. I have had some posts on this issue of being selfish vs. being altruistic and if they can actually be separated before. So those links are at the end.


"Two pioneers of computer-driven “robo” advice are joining an industrywide trend toward offering socially responsible investments.

Betterment LLC announced Wednesday that it will offer portfolios that favor companies with strong records on the environment, corporate governance, human rights, and health and safety, among other factors. Rival Wealthfront Inc. earlier this month announced similar plans to introduce socially responsible investing options later this year."

"New York-based Betterment is using exchange-traded funds that track socially responsible indexes. Wealthfront, of Redwood City, Calif., says it will give clients the flexibility to invest directly in stocks or avoid ones that don’t meet their criteria."

"Driving the trend is a desire on the part of individuals to spend and invest in ways that are consistent with their values. Data also show that socially responsible investments can outperform over the long run; since 1990, the MSCI KLD 400 Social Index has returned an average of 8.4% a year, versus 7.6% for the S&P 500 index."

"To get exposure to large-cap stocks, the company [Betterment] is using the iShares MSCI KLD 400 Social Fund. The index it tracks, the MSCI KLD 400 Social Index, screens out many companies involved in industries including tobacco, military weapons, nuclear power, adult entertainment and genetically modified crops."

"Wealthfront plans to give clients the option to screen out four sectors: fossil fuels, deforestation, weapons and tobacco.  In addition, it will let clients eliminate individual stocks they wish to avoid."

Is it a retailer’s job to keep shoppers from their vices? (or Adam Smith vs. CVS pharmacy)

Can You Find Virtue by Investing in Vice?

What if companies pledge to adhere to social and environmental accountability guidelines?

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) 

For a humorous view of this issue see

A Snickers a Day Keeps the Doctor Away: Why does CVS want to make my migraine cures hard to find? by Joseph C. Sternberg of the WSJ:

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