Increasingly, Americans are concerned with making sure their money is aligned with their moral principles. According to KPMG, 37% of American consumers consider environmental sustainability when making a purchase, and 33% also consider social responsibility when buying something.
When it comes to investing, the percentages are even more dramatic. One study from 2022 estimated that nearly 9 out of every 10 investors cared about deploying socially responsible strategies as they plan for retirement. Those numbers are on the rise year after year, too, as proof this trend isn’t going away.
| Socially Responsible Fund | Assets Under Management | Expense Ratio |
| iShares ESG Aware MSCI USA ETF (ticker: ESGU) | $12.7 billion | 0.15% |
| iShares Global Clean Energy ETF (ICLN) | $2.4 billion | 0.41% |
| Putnam Sustainable Leaders (PNOPX) | $6.4 billion | 0.92% |
| TIAA-CREF Social Choice Equity (TICRX) | $6.4 billion | 0.46% |
| Parnassus Mid Cap Fund (PARMX) | $3.7 billion | 0.96% |
| iShares ESG Aware MSCI EAFE ETF (ESGD) | $8.1 billion | 0.20% |
| Invesco Solar ETF (TAN) | $1.3 billion | 0.67% |
iShares ESG Aware MSCI USA ETF (ESGU)
Assets under management: $12.7 billion
Expense ratio: 0.15%, or $15 annually on $10,000 invested
This iShares fund is the obvious place to start if you’re after large-cap stocks that operate in a socially responsible way. It’s the largest such fund on this list as measured by assets, as well as the cheapest from an annual fee perspective. It’s also accessible, as you can buy a single share for a little over $100. The fund isn’t particularly glamorous or complicated, as it holds large U.S. stocks that get favorable environmental, social and governance ratings. This includes tech titans like Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA), among others. As you can see, the ESGU fund doesn’t pick companies that are exclusive to clean energy or other specific sectors – it just banks on about 300 stocks that operate in a more socially responsible way than their peers.
iShares Global Clean Energy ETF (ICLN)
Assets under management: $2.4 billion
Expense ratio: 0.41%, or $41 annually on $10,000 invested
This sister fund from iShares does indeed focus on clean energy stocks, for a way to invest directly in the companies that are helping with decarbonization efforts and fighting climate change. It’s not a newbie, either, with an inception date way back in 2008 and a long trading history. Right now ICLN holds companies including First Solar Inc. (FSLR) and Vestas Wind Systems A/S (OTC: VWDRY). There are about 100 total holdings in this ETF, with U.S. companies representing about 40% followed by China at 13% and Denmark at 11%. If you want a diversified and global approach to alternative energy stocks, ICLN is your best bet.
Putnam Sustainable Leaders (PNOPX)
Assets under management: $6.4 billion
Expense ratio: 0.92%, or $92 annually on every $10,000 invested
A bit pricier than some of the other funds on this list, thanks in part to its being structured as a traditional mutual fund instead of an exchange-traded product, this Putnam offering is nevertheless one of the largest and most respected sustainable investing options out there. It’s biased toward familiar stocks like Apple Inc. (AAPL) and UnitedHealthGroup Inc. (UNH), as it purchases “companies that have demonstrated leadership in key sustainability issues that are financially material to their business context.” This allows you to feel good about your portfolio, without having to focus on unproven green energy stocks or similar investments. This mutual fund also has no investment minimums, so even those of modest means can buy in.
TIAA-CREF Social Choice Equity (TICRX)
Assets under management: $6.4 billion
Expense ratio: 0.46%, or $46 annually on every $10,000 invested
Another traditional mutual fund, TICRX has a $2,500 investment minimum but a more modest expense ratio and an expansive portfolio of nearly 450 stocks at present. As with some of the prior funds, these are the biggest U.S. stocks you know and love – except that the fund gives “special consideration to certain environmental, social and governance criteria.” And unlike some of the other top-heavy funds that are heavily investing in a small group of holdings, TICRX has only two total positions – Microsoft and Nvidia – that command more than 2% of assets right now.
Parnassus Mid Cap Fund (PARMX)
Assets under management: $3.7 billion
Expense ratio: 0.96%, or $96 annually on every $10,000 invested
A bit pricey from an expense perspective and with a modest investment minimum of at least $2,000, this Parnassus fund provides a unique way to invest sustainably via mid-sized companies. Top holdings at present include derivatives exchange operator Cboe Global Markets Inc. (CBOE) and industrial software firm Roper Technologies Inc. (ROP). For those looking to supplement their blue-chip stocks, this Parnassus fund offers one of the few options out there that goes smaller without sacrificing ESG criteria.
iShares ESG Aware MSCI EAFE ETF (ESGD)
Assets under management: $8.1 billion
Expense ratio: 0.20%, or $20 annually on $10,000 invested
If you don’t mind looking outside the U.S., ESGD offers a great alternative to the prior funds that may be duplicative of your existing blue-chip investments. That’s because zero stocks on this list are located domestically, with Japan leading the pack at 23% of assets followed by the U.K. at 14% then France at 11%. These aren’t unknown companies in the portfolio, either, as top holdings include Danish health care leader Novo Nordisk A/S (NVO) and German technology giant SAP SE (SAP). Like some of the prior funds, this iShares option looks to invest in the most socially responsible firms out there. The big difference is that the nearly 400 stocks in ESGD come from the EAFE region – Europe, Australasia and the Far East.
Assets under management: $1.3 billion
Expense ratio: 0.67%, or $67 annually on $10,000 invested
Though the most targeted option so far on this list of socially responsible funds, this Invesco ETF goes all-in on a narrow segment of solar-related companies with only about 40 holdings. Right now, that includes domestic leaders Enphase Energy Inc. (ENPH) and First Solar along with Chinese companies such as JinkoSolar Holding Co. Ltd. (JKS) and Daqo New Energy Corp. (DQ). U.S. solar stocks make up just short of 60% of the portfolio, but there is definitely a global flavor to this clean energy ETF, too. Just keep in mind that as a sector-specific fund, it can be much more volatile than the diversified ESG options listed previously.
