SRI Performance Remains a Bright Spot for Robos 2021

Posted on May 19, 2021

SRI or ESG investing remains a hot trend in the investment industry. At Backend Benchmarking, we compare the equity performance of the SRI/ESG options and the standard options at the same robo advisor to analyze their differences. 

SRI Performance 

Socially Responsible Investing (SRI) remains a hot trend in the investment industry. At Backend Benchmarking, we compare the equity performance of the SRI options and the standard options at the same robo advisor to analyze their differences. The providers are Betterment, E*Trade, Ellevest, Merrill Edge, Morgan Stanley, M1 Finance, TD Ameritrade, and TIAA. Betterment recently introduced three new SRI portfolios: the Broad Impact portfolio, the Climate Impact Portfolio, and the Social Impact portfolio. This is the first Robo Report in which we can begin to report on them. Additionally, we cover a provider called Sustainfolio, which only offers SRI portfolios. 

Over the 2-year trailing period, the equity-only performance of the SRI portfolios outperformed the standard option at all providers except for E*Trade. The biggest performance gap was at Morgan Stanley, whose SRI equity portfolio outperformed the standard option by 3.11% annually. As mentioned above, the Morgan Stanley SRI portfolio was the top 3-year total portfolio performer. 

Over the last quarter, however, the results were mixed and there were many instances in which the standard option outperformed the SRI option. One factor is that SRI screens often exclude fossil fuels and many energy companies, which have lagged over the past two years but had a very strong first quarter as the cyclical sectors have bounced back.

Morgan Stanley 3-Year Performance

Morgan Stanley also claimed a top performance spot over the 3-year time period. Its SRI portfolio was the top performer relative to the Normalized Benchmark over this time. It is one of the few SRI portfolios whose entire equity holdings are invested in SRI-themed funds.

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