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How Ethical Investing Can Help You Retire Comfortably

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You can do well by doing good through your retirement portfolio. Those who employ ethical or socially responsible investing may also reap greater returns.

First, a little background on ethical or socially responsible investing. It’s very intentional because you choose companies or funds that help the environment, social justice and fair employment.

Getty

Getty

In effect, companies that are socially responsible are screened for doing the right thing along a specific set of criteria. Maybe they have an noteworthy environmental record or avoid animal testing. Sometimes they are not selling tobacco, firearms or in the gambling industry.

Ethical investing, though, is not a small set of &quot;do good&quot; investors. More than 2,000 money managers around the world — most of them with institutions — employ socially responsible criteria. It’s now a $23 trillion market.

While returns can vary from year to year, ethical investors tend to perform better than investors who don’t use social or &quot;sustainable&quot; principles.

According to a 2017 Morningstar study, more than half of U.S. funds that followed sustainability principles ranked in the top half of their investment categories. Lumped together, all of these investment dollars are being invested according to environmental, social or corporate governance standards (ESG).

&quot;ESG investing can be viewed as investing with an eye to the future – contributing to the sustainability of resources and the planet,&quot; notes a study from Strategic Benefit Services. &quot;The concept of ESG investing has evolved to incorporate the alignment of financial success with a positive social and environmental impact.&quot;

How do you locate funds with ESG goals? You can start with the Social Investment Forum, which offers basic education on these kinds of funds.

Then you can ask your plan sponsor to include funds that have ethical or ESG &quot;screens.&quot; Every major fund group offers them. Once you’ve had a chance to vet these funds’ objectives, see how they are performing over longer periods of time (decades). You can find performance ratings here.

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You can do well by doing good through your retirement portfolio. Those who employ ethical or socially responsible investing may also reap greater returns.

First, a little background on ethical or socially responsible investing. It’s very intentional because you choose companies or funds that help the environment, social justice and fair employment.

Getty

Getty

In effect, companies that are socially responsible are screened for doing the right thing along a specific set of criteria. Maybe they have an noteworthy environmental record or avoid animal testing. Sometimes they are not selling tobacco, firearms or in the gambling industry.

Ethical investing, though, is not a small set of “do good” investors. More than 2,000 money managers around the world — most of them with institutions — employ socially responsible criteria. It’s now a $23 trillion market.

While returns can vary from year to year, ethical investors tend to perform better than investors who don’t use social or “sustainable” principles.

According to a 2017 Morningstar study, more than half of U.S. funds that followed sustainability principles ranked in the top half of their investment categories. Lumped together, all of these investment dollars are being invested according to environmental, social or corporate governance standards (ESG).

“ESG investing can be viewed as investing with an eye to the future – contributing to the sustainability of resources and the planet,” notes a study from Strategic Benefit Services. “The concept of ESG investing has evolved to incorporate the alignment of financial success with a positive social and environmental impact.”

How do you locate funds with ESG goals? You can start with the Social Investment Forum, which offers basic education on these kinds of funds.

Then you can ask your plan sponsor to include funds that have ethical or ESG “screens.” Every major fund group offers them. Once you’ve had a chance to vet these funds’ objectives, see how they are performing over longer periods of time (decades). You can find performance ratings here.

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