Understanding SRI Indexes & the ETFs That Play Them

In this day and age, morals and values are taking precedence in how some investors construct their portfolios. Socially responsible investing (SRI), as it is aptly dubbed, seeks to bridge the gap between profits and purpose. The major followers of the SRI style take stock in various environmental, social and governance (ESG) metrics when crafting their portfolios. These ESG metrics can cover a wide array of factors, including how a firm treats its workers, if it ethically sources its raw materials/ingredients, what sort of executive compensation it has and carbon emissions. Putting these factors into some sort quantifiable index for investing seems like a daunting and impossible task. Luckily for investors, SRI index sponsors have several techniques to take the subjectivity of ESG out of the equation – making it very easy for investors to add a dose of SRI to their portfolios with exchanged-traded funds (ETFs).