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Sustainability Matters

Are Sustainable Equity Funds Doing What They Claim to Be Doing?

For the most part, yes, but many fall short on some dimensions.

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The universe of sustainable funds has grown rapidly over the past five years. U.S. investors can now choose from more than 300 open-end and exchange-traded funds that have sustainable investing at the core of their investment strategy. About two thirds of those strategies are equity funds.

These funds, however, are not all alike. Some focus on evaluating companies on the material environmental, social, and governance issues facing them and their industries. These are often operational policies and performance in areas like carbon emissions, pollution, treatment of workers, and overall business ethics. Others focus on particular themes--such as low carbon, gender diversity, and so on--or on selecting companies based on the social value of their products and services.

Jon Hale does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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