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Robo-advice pioneers target ethical investors

U.S. robo giants Betterment and Wealthfront are offering socially responsible investing options to clients.

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Investing doesn’t have to take a toll on your conscious anymore. U.S.-based platforms Wealthfront and Betterment are joining the green investing trend, giving users the option to invest in socially responsible companies.

New York-based Betterment announced Wednesday that it will have options to invest in companies with strong records on the environment, corporate governance, human rights, and health and safety, the Wall Street Journal reported.

Wealthfront, based in Redwood City, Calif., is planning a similar offering later this year.

The rivals are approaching the green investment options differently. Betterment is investing in ETFs that track socially responsible indexes. Wealthfront will allow users to invest directly in stocks and screen out four areas that might not match their socially conscious criteria, including fossil fuels, deforestation, tobacco and weapons.

Socially responsible is not a new concept among investors and a handful of robo-advisers in the U.S. already offer socially responsible investing. The practice, called environmental, social and corporate governance in the UK, has not yet caught on among many European robo-advisers, despite its popularity among asset managers.

There is debate however as to what exactly an ESG index or stock option means. Adrie Heinsbroek, head of responsible investment team at NN Investment Partners, argues that asset and fund managers need to establish defiintions before labeling products as sustainable or responsible.

“ESG integration should go beyond mere financial value and extend to social and environmental value,” Heinsbroek said. “By focusing on the triple bottom line of “people, planet and profit” and by balancing the interests of all stakeholders with economic, environmental and social dimensions, we achieve multiple value creation.”

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