ETFs Usher in a Fresh Era of Socially Responsible Investing

Pax World Management is in the process of introducing three new funds designed to track different baskets of socially responsible companies. While these new instruments will be a great complement to the small family of socially responsible funds, such as FTSE KLD Select Social Index Fund (KLD - commentary - Trade Now) and FTSE KLD 400 Social Index Fund (DSI - commentary - Trade Now), they are also ushering a new era of socially responsible ETF investing.

The instruments are ESG Shares FTSE KLD North America Sustainability Index Fund, ESG Shares FTSE KLD Europe Asia Pacific Sustainability Index Fund and ESG Shares FTSE Environmental Technologies Index Fund.

One interesting new aspect of these new instruments is the acronym "ESG" preceding them. Traditionally, socially responsible investing, or SRI, involves the exclusion of companies based on the moral grounding of the investor. Often, this is reflected in a refusal to invest in vice companies. Recently, however, the idea of socially responsible investing has evolved beyond personal vices to focus on the environment and government as well. Therefore, in order to embrace this evolution, the new instruments will take on the new name: ESG--environmental, social and governance.

This complement to traditional socially responsible investing allows investors to a take an compelling new approach to investing. It will be interesting to see if the added focus to global issues will boost interest in the instruments.

At the time of publication, Dion held no position in the ETFs mentioned.

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At the time of publication, Dion held no position in the ETFs mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.