We continually monitor developments in the markets in order to improve our products for our customers. Because of our commitment to continuous improvement, we’ve recently updated our portfolio to be an even better option for customers interested in socially responsible investing.
Our Socially Responsible Investing (SRI) portfolio strategy combines our robust portfolio allocation and low-cost funds—with an added socially responsible focus. We do this by investing part of our allocation into exchange-traded funds (ETFs) that score highly on MSCI’s ESG index. Measuring funds by their ESG scores helps to quantifiably define what constitutes as socially responsible and what doesn’t. An ESG score measures a corporation’s environmental impact, positive and negative social impact, its corporate governance, and involvement in controversies.¹
The intent of an SRI portfolio is to shine a spotlight on social responsibility, but returns and diversification are also important considerations. We give our customers the best of both worlds by offering an SRI portfolio that allocates 86% of stocks in the portfolio to socially responsible ETFs, while also maintaining appropriate asset class allocation and diversification.
We’ve added two new ESG-focused funds to our SRI portfolio:
ESGU—a U.S. Large-Cap stock ETF with an ESG focus
ESGD—an International Developed Markets stock ETF with an ESG focus
With these additions, we’ve reached two exciting milestones.
|We now have ESG-focused funds as both the primary, secondary, and tertiary funds within our U.S. Large-Cap stock allocation. We can ensure that your U.S. Large-Cap allocation is always fully invested in socially responsible funds, even when combined with our other valuable features such as Tax-Loss Harvesting+ (TLH+).||With the addition of ESGD, we now have an ESG-focused fund as the primary fund used in all three asset classes that are used most heavily in the portfolio, which are U.S. Large-Cap, International Developed Markets, and International Emerging markets.|
The second point above means that the percentage of the total allocation within our SRI portfolio that’s dedicated to ESG funds has increased significantly.
For example, if we consider the SRI portfolio at a 100% stock allocation, we now have 86% of the total allocation skewing towards ESG funds. This represents more than 2.5 times the 32% ESG-based allocation we had at the launch of our SRI portfolio in 2017.
Source: Betterment portfolio allocations.
Keep in mind that while the majority of the SRI portfolio’s stock ETFs are now socially responsible, non-SRI bonds are currently utilized to maintain proper diversification. To learn more about our specific methodology in constructing the SRI portfolio, please see our SRI white-paper, which has been newly updated to incorporate specific statistics from recent update.
A Leap Forward
With this update, customers who have a stock allocation of over 60% in our SRI portfolio will have the majority of their investment in socially responsible funds. This marks a significant leap forward in the overall quality of our socially responsible portfolio. As always, we will continue to keep a watchful eye on market developments so that we can keep improving all of our offerings, whether in our SRI portfolio or beyond.
Betterment customers who are already investing in our SRI portfolio do not need to take any action. We will simply use any incoming cash flows (such as deposits and dividends) and rebalances to allocate your assets in line with our updated strategy. If you have questions about our SRI portfolio, check out our FAQs.
¹ See the ESG Ratings Methodology Executive Summary for more detail.