- Betterment, the largest independent roboadviser with $US9.5 billion worth of assets under management, has taken its first step towards offering a sustainable investment portfolio.
- Demand for such sustainable investment solutions has increased in recent years, and Wall Street is responding.
Betterment, the largest roboadviser with $US9.5 billion under management, has taken its first step into the world of sustainable investing.
On Wednesday, the firm said it would start offering iShares DSI, a broad stock market exchange-traded fund that tracks socially responsible companies, as an alternative for the core portfolio’s US large cap exposures.
Alex Benke, vice president of financial advice and investing at Betterment, said the firm had been exploring different options to enter the sustainable investing space for sometime.
“We were waiting for both the right amount of interest from our clients and the right products,” Benke said.”Until recently most sustainable products didn’t meet our standards.”
The US large cap exposures typically make up a chunk of a total Betterment portfolio, meaning the social responsible investing (SRI) fund will only represent a portion of a user’s total investment. Users set a target allocation and then have funds directed to various asset classes, raging from US large caps to emerging market bonds.
Still, the new offering reflects the firm’s dedication to personalisation. The firm said it will add new SRI funds as they become available.
“Our vision is that the service should be built around the customer and it should be very personalised,” Betterment’s CEO, Jon Stein told Business Insider in a recent interview. “It should be built for their needs.”
According to research from Bank of America Merrill Lynch, demand for sustainable investment solutions is increasing and 93% of US millennials show a high preference for impact investing. And with millennials poised to inherit roughly $US30 trillion from Baby Boomers, according to a UBS white paper, catering to this investment preference will be integral to future growth for Wall Street firms.
Wall Street has responded by launching funds, producing more research on sustainable investments, and supporting green capital-markets transactions. The green bond market, for example, passed a milestone earlier this year, with $US200 billion in total issuance since the market’s inception. Issuers of such bonds, such as governments and companies, promise to put proceeds toward environmentally friendly projects.
UBS has made sustainability one of the cornerstones of its wealth-management business. It recently announced that its wealth-management unit raised $US325 million for The Rise Fund, an impact investment fund led by private equity firm TPG Capital. The bank’s $US325 million commitment is part of a greater goal to raise $US5 billion for impact investments designed to advance the UN’s Sustainable Development Goals.
When asked if Betterment’s desire is to have all of it assets roll over to the new portfolio, Benke said that wasn’t the goal.
“We don’t have a goal for how many sustainable assets we want to manage,” Benke said. “Our goal is to have 100% of people who want to be invested in an SRI portfolio to to be invested in one.”
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