Introduction
What are the top causes that investors care about? Are fund managers offering funds that align with those causes?
This report compares the causes that investors care about with causes offered by mutual funds and ETFs that describe themselves as ESG (Environmental, Social and Governance), sustainable, or impact funds.
To assess the causes that are most important to investors, the report uses anonymized data from more than 1000 Impact Assessments completed by investors on Ethos.
An Impact Assessment (or values-based assessment) is a questionnaire in which an investor selects the causes that are most important to them. Ethos includes 45 causes, which you can see here.
To assess the causes offered by fund managers, the report maps descriptions of more than 575 ESG and impact-focused mutual funds and ETFs to keywords related to causes (details available in the methodology section).
What are the top causes that investors care about?
We analyzed more than 1000 Impact Assessments taken through Ethos and broke down the top selected causes by investors, based on the percent of all causes selected:
#1: Climate action
Take urgent action to combat climate change and its impacts
What this cause is about
#2: Sustainable resource use
Ensure sustainable consumption and production patterns
What this cause is about
#3: Gender equality
Achieve gender equality and empower all women and girls
What this cause is about
#4: Life on earth
Protect biodiversity and ensure sustainable use of ecosystems
What this cause is about
#5: Peace and justice
Promote peaceful and inclusive societies, provide access to justice for all
What this cause is about
#6: Inclusive economies
Create inclusive economies with no poverty, decent work for all, and affordable living conditions
What this cause is about
#7: Health and well-being
Ensure healthy lives and promote well-being for all at all ages
What this cause is about
#8: Quality education
Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
What this cause is about
#9: Water and sanitation
Ensure availability and sustainable management of water and sanitation for all
What this cause is about
#10: Innovation
Innovate to foster economic growth and human development
What this cause is about
Climate Action was by far the most selected cause, with more than 6 out of every 10 investors selecting it in their assessment.
Three out of four of the top causes are environment related, including Sustainable resource use and Life on earth.
Social causes have historically taken a back seat in ESG investing to environmental causes; our data shows that both Gender equality and Peace and justice (which includes racial justice) are in high demand among investors. Both reflect widespread social movements that have grown in awareness and urgency in recent years.
Ethos also tracks sub-causes within the above causes (you can see all causes on Ethos here).
These are the most selected sub-causes:
| Sub-Cause | % of sub-causes selected on Ethos |
|---|---|
| 1. Reduced greenhouse gas emissions | 5.4% |
| 2. Renewable energy growth | 5.1% |
| 3. Sustainable use of natural resources | 4.0% |
| 4. Reduced waste | 3.7% |
| 5. Disaster readiness and effective aid | 3.7% |
| 6. Equal pay and opportunity | 3.3% |
| 7. No violence against women | 3.3% |
| 8. Healthy oceans | 3.3% |
| 9. Terrestrial biodiversity | 3.2% |
| 10. Racial justice and civil rights | 3.1% |
| 11. LGBTQ equality | 2.9% |
| 12. Conflict-free mineral production | 2.9% |
| 13. Accountable institutions | 2.9% |
| 14. Safety from violent conflict | 2.8% |
| 15. Humane treatment of animals | 2.7% |
| 16. Reduced inequality | 2.7% |
| 17. Access to affordable healthcare | 2.7% |
| 18. Quality primary education | 2.7% |
| 19. Clean water access | 2.6% |
| 20. Reduced availability of weapons | 2.6% |
| 21. Sustainable use of water | 2.6% |
| 22. Improved mental health | 2.6% |
| 23. Fair labor practices | 2.6% |
| 24. Zero hunger | 2.5% |
| 25. Child and maternal health | 2.5% |
| 26. No poverty | 2.5% |
| 27. Affordable, safe housing | 2.5% |
| 28. Decent, safe work opportunities | 2.4% |
| 29. Quality lifelong education | 2.3% |
| 30. Sanitation access | 2.3% |
| 31. Disease eradication | 2.3% |
| 32. Arts and culture access | 2.0% |
| 33. Technology innovation | 2.0% |
| 34. Free, secure flow of information | 1.8% |
| 35. Reduced use of tobacco | 1.8% |
What are the top causes covered by ESG and impact funds?
Are fund managers offering mutual funds and ETFs that align with the causes that investors care about?
We assessed ~575 ESG and impact-focused mutual funds and ETFs to determine the causes they focus on. The funds include a broad mix of asset classes, market caps, and geographies.
To determine the causes that a fund focuses on, we mapped ~110 cause-related keywords to each fund's desciption. Where a fund manager describes a fund with a cause keyword, we marked it as related to that cause.
See more details in the methodology section below.
This is the breakdown of causes that ESG and impact funds focus on, compared to the causes desired by investors:
| Cause | % of fund causes | % of investor causes | Difference |
|---|---|---|---|
| 1. Climate action | 22.6% | 16.2% | 6.4% |
| 2. Sustainable resource use | 8.2% | 11.9% | -3.7% |
| 3. Gender equality | 7.2% | 10.4% | -3.2% |
| 4. Life on earth | 7.2% | 10.1% | -2.9% |
| 5. Peace and justice | 9.5% | 9.7% | -0.2% |
| 6. Inclusive economies | 8.9% | 9.1% | -0.2% |
| 7. Health and well-being | 8.2% | 9.0% | -0.8% |
| 8. Quality education | 4.9% | 8.6% | -3.7% |
| 9. Water and sanitation | 11.5% | 8.2% | 3.3% |
| 10. Innovation | 11.8% | 6.9% | 4.9% |
% of fund causes:
Percent of total fund causes mapped to ~575 ESG funds
% of investor causes:
Percent of total causes selected by investors
Difference:
Difference between percentage of fund causes and investor causes
Climate-focused funds dominate the landscape, with Sustainable resource use (including recycling, waste, and responsible consumption), Quality education, Gender equality , and Life on earth the most underserved.
Fund managers are close to meeting current demand for Peace and justice , Inclusive economies and Health and well-being.
Fund managers should consider how they can design funds that align with all of the causes that investors care about. Fund products that focus on specific causes that investors care about are more likely to appeal to investors who want to integrate their values and conscience into their investment decisions.
Ethos can help with fund design and impact communication; reach out to us at business@ethosESG.com to learn more.
What are the top funds for each cause?
Ethos rates funds using data such as carbon emissions, pay equity, government fines, and more. You can see our methodology here.
These are some of the top-rated funds on Ethos for the top 5 causes:
| Cause | Example top-rated funds |
|---|---|
| 1. Climate action | |
| 2. Sustainable resource use | |
| 3. Gender equality | |
| 4. Life on earth | |
| 5. Peace and justice |
Methodology
To assess the top causes that investors care about, we anonymized data from 1000+ Impact Assessments completed by investors on Ethos.
In an Impact Assessment, an investor picks the top causes they care about, then rates from 1 (lowest) to 7 (highest) the importance of sub-causes within those causes.
For example, if an investor picks Climate action as a cause, they would then rate the importance of sub-causes Reduced GHG emissions, Renewable energy and Disaster readiness and aid.
You can see all causes on Ethos here, or take a free Impact Assessment here.
To assess what causes a fund focuses on, we searched fund descriptions for keywords related to each cause.
Where a fund manager describes a fund with the below keywords, we marked it as related to the associated cause:
| Cause | Keywords |
|---|---|
| Climate action | fossil fuel free, zero fossil fuel, green, climate, carbon, emissions, pollution, greenhouse, earth, emissions, clean energy, renewable energy |
| Sustainable resource use | circular economy, recycling, resources, responsible consumption, re-use, waste, conflict minerals, earth, consumption |
| Gender equality | gender, maternal, me too, equal opportunity, trafficking, violence against women, equal pay, lgbtq, women, female |
| Life on earth | biodiversity, animal, animal rights, terrestrial, forest, earth, extinction, wildlife, rainforest, deforestation, sustainable fishing, marine life, ocean, tree |
| Peace and justice | corruption, peace, justice, civil rights, minority rights, police violence, violent conflict, refugee, war, displacement, racism, racial, discrimination, social justice, mass shootings, gun control, weapons |
| Inclusive Economies | hunger, housing, job creation, labor rights, child labor, homeless, minimum wage, living wage, fair wage, safe work, economic justice, economic equality, economic development, economic disparities, poverty, community, communities |
| Health and well-being | health, well-being, coronavirus, covid, immunization, diseases, reproductive rights, access to healthcare, healthcare, tobacco |
| Quality education | education, theater, music, culture, achievement gap, quality education, secondary education, early childhood education, primary school, arts |
| Water and sanitation | water, clean water, safe water, drinking water, sustainable farming, sanitation |
| Innovation | innovation, data security, data privacy, open source, freedom of press, tech |
The ~575 ESG and impact-focused funds were selected from Ethos database to represent a broad mix of asset classes, market caps, and geographies.
Please reach out to us at support@ethosESG.com with any questions or feedback.
About Ethos
Ethos is a first-of-its-kind FinTech platform helping financial advisors, fund managers and institutional investors, and everyday investors align their money with the causes they care about, including racial justice, workplace safety, climate change, LGBTQ equality, and more.
If you are a financial advisor or institution working with Ethos, we help you use the results of a client's Impact Assessment to align the client's portfolio with their causes and report to them on the impact of their portfolio.