How Investing In Gender and Racial Equity Is A Step Towards Social Change

Betterment’s new Social Impact Portfolio lets you support companies who promote gender and racial equity, while maintaining a diversified portfolio with low expenses.

flower and law scales in bar chart

When Breonna Taylor and George Floyd were murdered earlier this year, the U.S. entered a period of mourning and social reckoning not felt since the murder of Michael Brown and subsequent rise of the Black Lives Matter movement in 2014.

Amidst the clamor for justice and accountability, there arose another distinct call-to-action for corporations to invest more in their Black and brown employees, to call out racism and discrimination, and commit funds to organizations working for social justice.

Here at Betterment, we quickly realized that our highest impact action might be to allow investors to use their dollars to effect change.

Investing in companies that care about equality, made easy.

In light of this, we asked ourselves how we could create a new portfolio with equality for women and Black and brown Americans at the heart of its mandate, while also staying true to our fiduciary duty of low costs and global diversification.

We found the answer by augmenting our Broad Impact portfolio to include two additional funds: Impact Shares' NAACP Minority Empowerment ETF (NACP) and State Street Global Advisors' Gender Diversity Index ETF (SHE). NACP allocates money towards companies that rank highly on their diversity policies and on how they engage with communities of color. SHE selects companies who lead their peers in terms of women in senior leadership positions.

These two funds, alongside the other funds with an ESG mandate in our Broad Impact portfolio (applying Environmental, Social, and Governance scoring criteria), now make up Betterment’s new Social Impact portfolio.

Sounds great, right?

Wrong. Because believe it or not, these two ETFs are some of the only ones of their kind. In fact, the NACP fund is the only ETF of its kind. How can investing in these funds lead to gender and racial progress with such a limited sphere of influence?

Using capital to influence positive social outcomes is vital to our democracy.

Part of the answer to change lies in our collective, continued contribution, which can grow the relative power these leading companies have over time. By investing in NACP, investors are putting more of their money in companies with a proven track record of minority empowerment and diversity policies. By investing in SHE, investors are placing more of their money in companies that have demonstrated more of a commitment to gender diversity within senior leadership than other firms in their sector.

As Betterment’s SVP of Operations & Legal Counsel, Boris Khentov says, we can “work to erase the gap by incorporating this focus into our investment strategy now. As our dollars flow into the funds, they’ll get bigger. This raises awareness of the funds, while driving down costs thanks to economies of scale, which will bring along even more investors.”

Now more than ever—when the number of female CEOs has actually decreased over time and when there are only three Black Fortune 500 CEOs—we need to send a signal that there is demand for a variety of lower cost funds that focus on social equity, so that investors can increase their impact along the values that matter most to them.

Ultimately, this is an aspirational portfolio. In the same way we want to see change in the world, change that will take time, the Social Impact Portfolio is a step towards aligning ourselves to that ultimate goal, and that of our customers.

Start with the Social Impact Portfolio to help grow your money responsibly.

Regardless of how you choose to invest, Betterment aims to help you align your money with your values. That means not only offering a socially responsible investing portfolio, but also helping you identify your goals and invest for them appropriately. Learn more about our guidance and get started saving for your future.

Higher bond allocations in your portfolio decreases the percentage attributable to socially responsible ETFs.