Exchange Traded Funds (“ETFs”)


Exchange Traded Funds (ETFs).  This is an area that may well need little, if any introduction.  Though a recent addition to investment portfolios during the last decade, ETFs have become an overnight sensation.
Definition:  ETFs offer public investors an undivided interest in a pool of securities and other assets, and thus, are similar in many ways to traditional mutual funds, except that shares in an ETF can be bought and sold throughout the day like stocks on an exchange through a broker- dealer.  ETFs therefore possess characteristics of traditional mutual funds, which issue redeemable shares, and of closed-end investment companies, which generally issue shares that trade at negotiated market prices on a national securities exchange and are not redeemable (Source: Securities and Exchange Commission).
This website will not advocate investing in ETFs for a variety of reasons.  For starters, they attract a speculative nature in people.  I just can’t reconcile the “making of a quick buck” with ethically-based SRI.  Other negatives include:  Tracking error, Index Composition, sometimes-high management expenses, opaque operating structures, and hidden fees.
SRI ETFs, given their niche nature only exacerbate these potential disadvantages.  For example, by default, an ETF tracking the S&P500 will likely have much lower fees and little tracking error, compared to a small, new, exotic ETF tracking solar energy.  Besides, nearly all of the SRI ETFs are invested in Environmental indices, rather than indices of socially responsible corporations (regardless of whether they’re in green industries or not).
Lastly, comparing this list to 2010’s list (nearly two years) shows the SRI list is actually dwindling despite the general popularity of the investment vehicle.  For the reasons stated above, this website recommends investors purchase open-end Mutual Funds (rather than ETFs).
In the table below are ETFs that try to mimic the investment performance of Socially Responsible, Environmentally-friendly, and Religiously Responsible indices.  Note, for example, there are few, if any SRI ETFs that a U.S. investor could reasonably purchase.  Also note that, investment performance has been weak with the best performing ETF rising 26% over the past one year period (ending Sept’12).   Readers may wish to download the excel file of the below table.
Notes on Specific ETF names:
DB Europe Christian:   Excellent performance, low Beta, and investments in large, stable diverse companies (within the STOXX Europe Christian Index)
CCB Social Responsibility: On the opposite end of the spectrum is CCB Social Responsibility which has had weak investment performance, high management expenses, and a portfolio (i.e., index) with low diversification (36% are assets are invested in Banks).
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Ticker Name Domicile Tot Ret 1Y Industry Focus
510090 CH CCB SOC RESPONSIBILITY ETF China -10.88 Socially Responsible
120210 KS KTB GREAT SRI ETF South Korea 22.61 Socially Responsible
148040 KS KDB PIONEER SRI ETF South Korea N.A. Socially Responsible
XEN CN ISHARES JANTZI SOCIAL INDEX Canada 7.7 Socially Responsible
XECD GR DB EUROPE CHRISTIAN ETF Ireland 26.4 Religiously Responsible
CIMBDVD SP CIMB S&P ASIA PAC DVD ETF Singapore N.A. Religiously Responsible
PBW US POWERSHARES WILDERH CLEAN EN United States -36.6 Environmentally Friendly
INRG LN ISHARES S&P GL CLEAN ENERGY Ireland -41.84 Environmentally Friendly
ECOO11 BZ ISHARES CARBONO EFICIENTE Brazil N.A. Environmentally Friendly
PBD US POWERSHARES GBL CLEAN ENERGY United States -29.38 Environmentally Friendly
KLD US ISHARES MSCI USA ESG SELECT United States 16.44 Environmentally Friendly
DSI US ISHARES MSCI KLD 400 SOCIAL United States 18.72 Environmentally Friendly
ICLN US ISHARES S&P GBL CLEAN ENERGY United States -43.7 Environmentally Friendly
PZD US POWERSHARES CLEANTECH PORTFO United States -7.65 Environmentally Friendly
QCLN US FIRST TRUST NASDAQ CLEAN EDG United States -21.54 Environmentally Friendly
NASI US PAX MSCI NORTH AMERICA ESG I United States 12.43 Environmentally Friendly
138210 KS KTB GREAT GREEN ETF South Korea -8.19 Environmentally Friendly
HECO US HUNTINGTON ECOLOGICAL STRATE United States N.A. Environmentally Friendly
GIVE US ADVISORSHARES GLOBAL ECHO ET United States N.A. Environmentally Friendly
GRID US FIRST TRST NASD CL EDG SGIIF United States 3.45 Environmentally Friendly
EVX US MARKET VECTORS ENV SERV ETF United States 6.25 Environmentally Friendly
KSMCLNT IT KSM CLEANTECH Israel 0.07 Environmentally Friendly
CSAE SW CSETF ON CS GLOBAL ATL ENERG Ireland -22.58 Environmentally Friendly
1347 JP NIKKO ETF – FTSE JPN GREEN C Japan -9.5 Environmentally Friendly
AWWF FP AMUNDI ETF GREEN TECH France -16.32 Environmentally Friendly
Data as of September 2002,  Source: Bloomberg LLC

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