Wealthfront has already responded to client demand to omit buying securities from indices in sectors from four main categories: fossil fuels, deforestation, weapons and tobacco. So clients can click on which categories to omit instead of buying the whole index. That way, a client doesn’t loose the diversification benefit of an index and at the same, is not in conflict with his or her values.
Direct Indexing is part of PassivePlus®, Wealthefront signature suite of investment features which allows investors to optimize tax harvesting from moves of individual stocks. Since summer 2017, Wealthfront clients are able to build their portfolios in a Socially Responsible Investing (SRI) style.
Morgan Stanley Access Investing, the new robo-advisor launched at the end of 2017 already allows investing in thematic startegies that include gender diversity, climate action and other sustainability themes. This new offering is priced at 35bps annually. Clients can choose from indexed ETFs, mutual funds, and thematic strategies.
Betterment has showed genuine concern around the limitations of existing SRI financial products and for now, is using the iShares MSCI KLD 400 Social Fund, which tracks the MSCI KLD 400 Social Index and has large-cap stock exposure. Companies involved in tobacco, military weapons, nuclear power, adult entertainment, and genetically modified crops are screened out. And the iShares MSCI USA ESG Select Fund for tax-harvesting purposes. Both these ETFs have high fees of 50bos compared the average of 9bps for Betterment’s core portfolio.
Personal Capital, the third largest US standalone robo advisor in terms of AUM and with a hybrid approach from the start, is also listening to the increasing interest and demand from clients. For no extra charge to clients, Personal Capital will screen U.S. equities on environmental, social and governance factors. The analytics are provided from Sustainalytics, a provider of ESG research and analytics, to determine best-in-class companies in each domestic peer group.
With this ESG offering, Personal Capital may also be drawing more attention to its hybrid advice model. It is the human advice service of Personal Capital that is a paid service. Increased engagement around ESG investments with clients may increase the conversion from the free service to the paid service.
WealthSimple, the Canadian robo-advsior that opened doors recently in the UK, has also included SRI capabilities in their offering. “We always look to our clients for feedback on which features they want to see next, and SRI has been requested from the first day we launched in the UK,’ said Toby Triebel , CEO Europe to Citywire. It isn’t clear which specific funds have been include but the focus is on investments in cleantech innovation, fair labour standards or low carbon emissions.
Two standalone digital investment platforms that are 100% dedicated to sustainable investing, are OpenInvest and Earthfolio. OpenInvest is a YCombinator and Andreessen Horowitz-backed startup focused on the under-served markets in customized ESG asset management. They offer their services for 50bps flat fee. They have also designed a proxy voting app that just makes it easy to exercise your rights as a shareholder; with a swipe. Earthfolio is approaching sustainable investing with a thorough screening approach on multiple factors.
“Keep winning me.
Pay attention to my values.
Lets show the world that ESG and SRI investing, is good business”