Our SRI Portfolio for 401(k) Plans Just Got Even Better
The proportion of socially responsible funds used in our SRI portfolio is growing, helping your plan participants express their values.
International Developed Markets are now represented by ESGD, a socially responsible stock ETF.
Our primary, secondary, and tertiary tickers used for TLH+ within U.S. Large Cap Markets are now all socially responsible ETFs: DSI, SUSA, and ESGU.
The SRI portfolio at a 100% stock allocation now has 86% of the total allocation skewing towards ESG funds. 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 401(k) participants 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 provide 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 a new ESG-focused fund to our SRI portfolio: ESGD—an International Developed Markets stock ETF with an ESG focus.
With this addition, we’ve reached an exciting milestone.
|With the addition of ESGD, we now have an ESG-focused fund 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.|
This 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 a recent update.
A Leap Forward
With this update, participants 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 401(k) participants 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 contributions 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.
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