Engaged Tracking Blog

Robo Advisors and the Rise of Low Carbon Investment Strategies

06/03/17 12:35 / by Ravi Patel

Guest post by Sophie Blistein, Marketing Coordinator at OpenInvest


It’s been hard to miss the emergence of “robo advisors” as major players in the personal investment space. An estimated $21 billion dollars (1) is already invested with robo advisors in the US - a number expected to grow to $5 trillion by 2025. (2) Their low costs and low minimums are helping a new generation plan securely for the future.

But what does this mean for our actual holdings? Customers are typically invested in a diversified, passive fund that includes the whole economy - from healthcare and consumer goods to fossil fuels and private prisons. Especially with robo advisors, where there’s usually no human component to help you sort out the positive investments from the harmful ones, how can you ensure that your money aligns with your values?

Fortunately, we have the technology to solve this problem. OpenInvest is a robo advisor, but it doesn’t sacrifice its low fees and simple interface to provide advanced features that give you control over the social and environmental impacts of your portfolio. You can easily filter out companies or sectors who violate your values - such as heavy polluters or weapons manufacturers - while favouring those creating the kind of world you’d like to see - such as companies with more gender diversity or leading the fight against climate change. 

Consider the Volkswagen scandal in 2015, when the company installed ‘defeat devices’ into their cars to cheat Clean Air Act emissions standards. (3) What if you no longer wanted to finance a company that scammed consumers and lied about its pollution levels? Divesting would be impossible with a mutual fund or an ETF. But that’s easy for OpenInvest. Using our proprietary algorithms can help you automatically rebalance your portfolio, keeping it diversified and tracking the market.

And you can take it a step further. Sharing these actions means you’re not just taking a stand, you’re joining a movement. And these movements are all around us already - the push for colleges to divest their endowments from fossil fuels is happening nationwide, and even in national governments. (4) More and more investors are demanding responsible investing options, especially younger generations: 84% of Millennials investors are interested in socially responsible investing. (5)

Studies show that socially responsible portfolios tend to perform just as well as or better than non-responsible investments. Plus, you can make a real, calculable impact on the world around you, like helping reduce global pollution levels. Data from ET Index Research allows OpenInvest to actively screen out the worst performers and favour leaders in reducing carbon emissions - all while calculating this impact in real-time.

ET Index Research’s data covers scope 1 (direct), scope 2 (indirect) and scope 3 (supply chain and other) emissions, so they get the biggest and most accurate picture of a company’s pollution levels. This broad view of pollutant complicity is important because screening out high-carbon offenders is the most popular action people take with OpenInvest.

Pollution is something we see every day. It’s a major conversation topic in today’s tumultuous political scene, and it’s one of the easiest things we can impact if we change our behaviour. We can buy a fuel efficient car or take public transportation, reduce energy use, recycle, etc. It makes sense that people want to extend that to their financial behaviours. A user who invests just $5,000 with us will avoid as much carbon dioxide as a car produces in four months each year.

You too can take advantage of the information and data at your fingertips. Your financial assets are one of the most powerful ways you can affect the world. Use them wisely.

Ravi Patel

Written by Ravi Patel