Since 2018, professionally managed assets in the U.S. using socially responsible investing (SRI) strategies have grown by 42% and now total $17 trillion, according to the United States Forum for Sustainable and Responsible Investment. 

With SRI—which also refers to sustainable, responsible, and impact Investing—on the rise, robo-advisors, automated investment management services with minimal or no human involvement, are increasingly offering sustainable investment portfolios. 

Whether called SRI; environmental, social, governance (ESG) investing; impact investing; or sustainable investing—a few of the terms currently in use—this approach to investing recognizes that the social, environmental, and corporate governance impacts of investments are part of the returns generated by every portfolio. Those impacts should help guide investment decision-making. In other words, with SRI (the term we’ll use), you can invest for profit, people, and the planet. 

Robo-advisors, such as Ellevest, Wealthfront, or SoFi, use computer software and an algorithm to both put together and maintain investment portfolios. Many robo-advisors champion certain causes or target specific audiences. For example, Ellevest is a robo-advisor which markets itself specifically to women in order to address a gender gap in the financial services industry. According to Data USA, 68.5% of personal financial advisors are men. 

“Some robo-advisors have different focuses than others,” says Helen Beichel [see footnote], founder of FatTail Financial Advisory Group {GBN}. “But one thing I think they probably have in common is basic investment management services with a focus on low cost, passive investment management.” 

Art Tabuenca is the founder of EarthFolio, an automated investing service managed by Blue Marble Investments which focuses solely on sustainable investing. Tabuenca says robo-advisors have made investing in a fully diversified portfolio more accessible because of lower management fees and what is typically a lower minimum investment amount. Consulting a financial advisor, he says, is significantly more expensive. 

“What robos did is just kind of disrupted [the personal] model and said, ‘Look, we can deliver this advice to someone at a high level, at a much lower amount,’” he says. 
Boris Khentov, senior vice president of operations and legal counsel at Betterment, a financial advisory company which offers robo-advising services, says it can be more expensive to have a portfolio composed entirely of SRI investments because the investments required to put together that kind of investment portfolio are more expensive to manage. Betterment’s portfolios generally consist of a broader mix of exchange-traded funds (ETFs), which are less expensive to manage. 

Betterment, which first launched its SRI options in 2017, offers three SRI portfolios—Broad Impact, Climate Impact, and Social Impact. These options are greener than conventional robo-investing offerings and less green than a non-robo option that actively screens and engages with companies. SRI does not have a fixed definition but can instead be understood as a range of practices. Khentov says Betterment’s SRI portfolios aim to balance financial performance with accessibility and impact. 

EarthFolio offers entirely ESG portfolios, some of which are also fossil-free. Tabuenca says an entirely ESG portfolio can be more expensive because it must incorporate different types of investments, such as mutual funds, which can lead to slightly higher operating expenses. This is because there is not currently enough variety in ETFs to build a fully ESG portfolio. 

The Importance of Accountability 

One factor to consider is whether an investment firm is independent. Beichel says conflicts of interest can arise when companies, including those offering robo-advisors, provide multiple in-house financial services, which decreases the checks and balances that come from doing business with other companies. These practices can create incentives to only offer clients in-house services or portfolios, rather than considering other potentially more beneficial options. 

“One thing to consider is what the potential conflicts of interest might be,” Beichel says. “Is the firm you’re dealing with independent? Are your financial planning, custodial, broker, dealer, and investment advisory firms separate, and if they’re not separate, why not?” 

Beichel also recommends being aware of what criteria and data providers portfolio managers are using when integrating SRI concerns, especially when it comes to robo-advisors that lack active, human management and have fewer investment options. 

“[Robo-advisors] could be a good option for novice investors, in particular for people who are just beginning to grow their portfolios,” Beichel says. “[People] just need to be educated consumers and understand that robo-advisor money managers are not involved in changing corporate manager behavior beyond using the data from ESG data providers.” 

Human vs. Robot 

Investors should also consider the pros and cons of robo-advisors when searching for the best tools and products to increase their socially and environmentally responsible investments. 

Robo-advisors differ from traditional financial advisors in that they offer investment management services and advice at a lower investment minimum and money management fee. Tabuenca says an online platform may also make investing more accessible to younger generations who frequent that medium and tend to support social justice issues. 

However, robo-advisors do not know the ins-and-outs of a person’s financial situation, or interests, which can be important in SRI. 
“Robo-advisors provide services online and through call centers,” Beichel says. “They don’t actually meet people face-to-face like I do. You don’t get a person who knows your financial situation intimately, and financial advising can be an intimate process.” 

The value to working with live financial advisors is that they have more strategies and products to offer, including community investment options and support for shareholder engagement. 

Beichel also says robo-advisors tend to provide only basic, standardized financial education and investment management based on your investment goals, values, and risk with limited support for more complex financial needs. 

As the SRI marketplace continues to grow and evolve, both Tabuenca and Khentov predict that more investment options will become available, expanding what robo-advisors can offer. 

“We see social and environmental issues that we’re grappling with, and we’re saying, ‘Well, what can I do about it?’” Tabuenca says. “Money becomes an extension of what you want to see in the world.” 

What can you do to green your investments? 

No matter what kind of advisor you may use, there are ways you can make your money work for the causes you care about. 

Find a Financial Advisor Focused on SRI 

Having an expert guide you through the transition to SRI, or strengthen your current SRI portfolio, can help you navigate the growing number of investment options. Find an advisor that is the best fit for you at greenpages.org. 

Divest and Reinvest 

The burning of fossil fuels is a major cause of climate change. You can contribute to a clean-energy economy by divesting from fossil fuels, shifting your investments to clean energy and supporting policies which work toward a fossil-free future. Learn more about how you can divest at greenamerica.org/divest-reinvest. 

Use Your Power as a Shareholder 

If you own stock directly, rather than in a mutual fund, you have influence over how companies operate. As a shareholder, you can advocate for the issues that you care about and have an impact on corporate behavior. Learn more about shareholder activism at greenamerica.org/shareholder-activism.

_{FOOTNOTE: Registered Representative, Cambridge Investment Research Inc., a Registered Broker/Dealer, Member FINRA/SIPC, Investment Advisor Representative, Cambridge Investment Research Advisors Inc., Cambridge and Fattail Financial Advisory Group are not affiliated.}