7 Best Robo-Advisors for Socially Conscious Investors of February 2022

One important question to ask regardless of the term an advisor or robo-advisor uses for their socially responsible portfolios is how they create those portfolios. Traditionally, “socially responsible” portfolios have only excluded investments deemed unacceptable, such as stakes in tobacco or alcohol. There has more recently been a push to also include positive investments, such as solar energy companies. Now, there is little consensus about which terms use exclusive methods, which use inclusive and which use both. That’s why it’s important to ask about any potential advisor’s methodology for choosing socially conscious investments.

For the most part, no. While some robo-advisors let you exclude certain investments, their function is to build a portfolio for you. If you want to pick your own investments, you’ll likely want to work with an online broker (here’s our roundup of the best brokers). There has been a recent explosion of exchange-traded funds and mutual funds that make it easy for investors to support their beliefs within a diversified portfolio (they are also the building blocks of most robo-advisors’ SRI portfolios). These funds eliminate the legwork of identifying individual stocks that match specific ESG criteria. If you’re looking for socially conscious investments you can choose yourself, see our top picks for ESG funds.

Research from Bloomberg Green and the Morgan Stanley Institute for Sustainable Investing suggests yes. While every investment has some inherent risk, there is evidence that ESG investments may have lower risk than their traditional counterparts. And in studies from research firm Morningstar and asset-management firm Arabesque Partners, ESG investments have not only matched conventional funds in performance, but outperformed them. (Morningstar is a NerdWallet advertising partner.)

If you’d like to know exactly what kind of impact your investment has had, it’s a good idea to request an impact report from the fund or company you’ve invested in. This will outline things like carbon emissions, gender diversity and initiatives to have an impact on local communities.