The current shift toward sustainability left a deep impact on the investment environment deeply. Be it environmental, social and governance (ESG) investing, socially-responsible investing (SRI) or impact investing, investors comprising millennials in particular, are making investment decisions, comfortably based on these themes. While there is a distinct difference between all three themes, investors’ prime focus remains on those meeting their socially impacting goals.
The integration of ESG factors with traditional financial analysis helped identify potential risks and opportunities, making the same investors’ go-to option during the pandemic. In fact, the Global Sustainable Investment Alliance’s (GSIA) biennial Global Sustainable Investment Review states that sustainable investment totaled $35.3 trillion, reflecting 15% growth in two years, more than one-third of total wealth of the world’s five largest markets (the United States, Canada, Japan, Europe and Australia/New Zealand).
What is fueling sustainable investment growth? Per the aforementioned report, “rising consumer expectations, strong financial performance and the increasing materiality of social and environmental issues — from biodiversity to racial equity to climate change” play a significant role in bolstering this trend.
In the last two years, sustainable investment assets under management grew 42%. ESG funds amassed about $51 billion from investors in 2020, double of what was achieved in 2019 and 10-fold of that in 2018. Per a Morningstar report, U.S. sustainable funds drew $21.5 billion as net inflows in the first quarter of this year, higher than the previous record and an all-time high of $20.5 billion accumulated in the fourth quarter of 2020.
Given the current pace and the national government’s influence, especially President Joe Biden’s executive order on climate-related financial risk, is also buoying demand for sustainable investment. Though changing frameworks, regulations and definitions are making it difficult to precisely track global trends. ESG integration is gaining popularity, netting in $25.2 trillion worth of assets, globally.
The current surge in sustainable investment also inspired renowned fund managers like Fidelity Investments to expand their sustainable investing line-up. The giant added five actively managed ESG funds to its list in June, offering investors and advisors 11 ESG mutual funds and ETFs.
4 Funds to Snap Up
Given such positives, we handpicked four sustainable investment-based mutual funds. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on the past performance of the fund but also on its likely future success.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are the primary reasons for parking money on the mutual funds (read more: Mutual Funds: Advantages, Disadvantages and How They Make Investors Money).
Janus Henderson Global Technology and Innovation Fund Class A (JATAX – Free Report) aims for long-term growth of capital. The fund invests majority of net assets in securities of companies benefiting from advances or improvements in technology.
This Sector-Tech product has a history of positive total returns for more than 10 years. Specifically, the fund’s returns are 30.2% and 32.2% over the past three and five-year periods, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
JATAX has a Zacks Mutual Fund Rank of 1 and an annual expense ratio of 0.99% compared with the category average of 1.05%.
New Alternatives Fund Class A (NALFX – Free Report) aims for long-term capital growth with income as its secondary objective. It primarily invests in common stocks of companies and even in other equity securities, such as real-estate investment trusts and American Depository Receipts.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, NALFX has a three and five-year returns of 28.7% and 19.8%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.96% compared to the category average of 1.26%.
This Zacks Sector – Large Cap Value has a history of positive total returns for more than 10 years. Specifically, PARNX has returned 18.5% and 16.8% for the three and five-year periods, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PARNX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.83%, which is below the category average of 1.09%.
Calvert Equity Fund Class A (CSIEX – Free Report) aims for growth of capital through investment in stocks believed to offer opportunities for potential capital appreciation. The fund invests majority of assets in common stocks of companies that rank among the top 1,000 U.S.-listed companies.
This Zacks Large Cap Growth product has a history of positive total returns for more than 10 years. Specifically, CSIEX has a three and five-year returns of 23.7% and 20.8%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSIEX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.94% compared to the category average of 0.99%.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.