{"id":14405,"date":"2021-09-27T09:36:18","date_gmt":"2021-09-27T16:36:18","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=14405"},"modified":"2024-11-04T07:38:13","modified_gmt":"2024-11-04T15:38:13","slug":"socially-responsible-vs-classic-portfolio","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/socially-responsible-vs-classic-portfolio\/","title":{"rendered":"How Wealthfront\u2019s Socially Responsible Portfolio Compares to Our Classic Portfolio"},"content":{"rendered":"\n

Note: In November 2024, Wealthfront updated its asset allocations\u2014including those for our Socially Responsible portfolio. You can read about the changes in our Socially Responsible Investing white paper<\/a>. <\/em><\/p>\n\n\n\n

Earlier this month, we introduced Wealthfront\u2019s new Socially Responsible portfolio<\/a> so you can conveniently invest in a way that\u2019s consistent with your values and beliefs and benefit from Wealthfront\u2019s best-in-class automation features like our Tax-Loss Harvesting<\/a>. Socially responsible investing (SRI)<\/a> means different things to different people, so we think it\u2019s important to be transparent and specific about our approach. At Wealthfront, SRI means promoting positive social impact by choosing investments that increase your exposure to companies vetted for their support of environmental, social, and governance (ESG) factors. <\/p>\n\n\n\n

Here, we\u2019ll explain exactly what\u2019s in our expert-built Socially Responsible portfolio and show you how it stacks up against our Classic portfolio.<\/p>\n\n\n\n

What\u2019s in our Socially Responsible portfolio<\/h2>\n\n\n\n

Our Socially Responsible portfolio is designed around environmental, social, and governance factors. Our investment research team analyzed hundreds of funds to balance social responsibility with long-term performance. In building our Socially Responsible portfolio, we chose funds that include companies that are involved in clean and renewable energy and exclude companies that engage in environmentally destructive businesses (like thermal coal, palm oil harvesting, and gas refining). We also chose funds that favor companies that empower women, minorities, and members of other disadvantaged classes. For more details, we encourage you to check out our white paper<\/a>.<\/p>\n\n\n\n

ETFs (or exchange traded funds<\/a>) are the building blocks of our Socially Responsible portfolio, and we choose an ETF to represent each asset class we include. We\u2019re able to conduct Tax-Loss Harvesting on 100% of the ETFs in our Socially Responsible portfolio. For every SRI ETF in your Socially Responsible portfolio, we\u2019ve vetted an alternative SRI ETF. As a result, you can lower your tax bill effortlessly<\/a> without compromising on your values. <\/p>\n\n\n\n

The table below shows the primary ETFs we use in our Socially Responsible portfolio, as well as our Classic portfolio. <\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Our Socially Responsible portfolio and our Classic portfolio use the same ETFs for TIPS and Municipal Bonds. That\u2019s because both TIPS and Municipal Bonds are naturally socially responsible, as they typically fund government spending on things like infrastructure, schools, and social programs, as well as day to day operations. <\/p>\n\n\n\n

Not every asset class in our Classic portfolio has a good socially responsible ETF that can be used to represent it, so we exclude Emerging Bonds, Dividend Stocks, and Real Estate from our Socially Responsible portfolio. Even without these asset classes, the portfolio stays well diversified and has expected returns that are similar to what you get with our Classic portfolio. <\/p>\n\n\n\n

How our Socially Responsible and Classic portfolios stack up<\/h2>\n\n\n\n

ESG scores for our Socially Responsible portfolio<\/h3>\n\n\n\n

There are two main ways we quantify how SRI-friendly our Socially Responsible portfolio is. The first is using overall ESG scores. MSCI<\/a> (an investment research company) publishes these scores for investment instruments based on a range of factors related to environmental, social, and governance practices. Investment instruments are scored on a scale from 0-10 with 10 being the best possible score.<\/p>\n\n\n\n

Below, you can see how our Socially Responsible portfolio\u2019s ESG score stacks up against our Classic portfolio for each risk score. The chart below shows the overall weighted-average ESG score for a taxable Investment Account. We excluded Muni Bonds from the calculation because they don\u2019t receive ESG scores.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

As you can see, our Socially Responsible portfolios score significantly higher. Across all risk scores, our Socially Responsible portfolio has an average ESG score of 7.2, versus 5.9 for a Classic portfolio. That difference grows even larger for portfolios with higher risk scores.<\/p>\n\n\n\n

Carbon intensity scores for our Socially Responsible portfolio<\/h3>\n\n\n\n

We highlight a second sustainability metric, which scores companies based on their carbon emissions. This metric, called carbon intensity<\/em>, is calculated by MSCI and captures the tons of carbon dioxide emitted by each company, per million dollars in sales. Carbon intensity scores are the second way we quantify how SRI-friendly our Socially Responsible portfolio is. This metric is a bit more tangible than ESG scores because it measures the tons of carbon dioxide emitted by a company per million dollars in sales. For carbon intensity, a lower score is better. <\/p>\n\n\n\n

The chart below shows the carbon intensity score for our taxable Socially Responsible portfolio and Classic portfolio. As you can see, our Socially Responsible portfolio is 32% less carbon intensive on average! <\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The difference is even larger for IRAs \u2014 on average, our Socially Responsible portfolio is 52% less carbon intensive than our Classic portfolio.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

 Invest for good<\/h2>\n\n\n\n

We know many of our clients don\u2019t just want to grow their wealth \u2014 they want to make a difference<\/a>. That\u2019s why we\u2019ve designed our Socially Responsible portfolio to promote social impact while still providing risk-adjusted returns that are similar to what you\u2019d get with our Classic portfolio. You can also choose to treat our Socially Responsible portfolio as a starting point \u2014 it\u2019s fully customizable so you can change the asset allocation, add or remove asset classes, and choose from a wide range of additional investments<\/a> like ETFs for clean energy and racial equity. We\u2019re here to support you as you build your wealth on your own terms.<\/p>\n","protected":false},"excerpt":{"rendered":"

Note: In November 2024, Wealthfront updated its asset allocations\u2014including those for our Socially Responsible portfolio. You can read about the changes in our Socially Responsible Investing white paper. Earlier this month, we introduced Wealthfront\u2019s new Socially Responsible portfolio so you can conveniently invest in a way that\u2019s consistent with your values and beliefs and benefit […]<\/p>\n","protected":false},"author":129,"featured_media":14418,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1360],"tags":[1632],"coauthors":[82],"class_list":["post-14405","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-product-news","tag-sri"],"acf":[],"yoast_head":"\nWhat\u2019s In Wealthfront\u2019s SRI Portfolio? | Wealthfront<\/title>\n<meta name=\"description\" content=\"We designed our Socially Responsible portfolio around environmental, social, and governance factors. 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