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Investing Specialists

ESG ETF Bucket Portfolios for Retirees

These in-retirement portfolios invest in ESG-friendly ETFs that should provide marketlike exposures.

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Sustainable mutual funds--also called ESG (environmental, social, governance) funds--have been soaring in popularity. Through September of this year, the group had attracted $13.5 billion in new assets. Jon Hale, Morningstar’s director of sustainability research, believes that by year-end, asset inflows into the group will be 3 times higher than the $5.5 billion the group received in 2018, which itself was a record-setting year.

Mirroring a trend in the broader mutual fund universe, passively managed ESG funds are getting more attention, too, as a share of the overall exchange-traded fund universe. Hale notes that for 2019 through September, about half of the assets flowing into ESG products went to passive funds. Passively managed ESG offerings are growing in number, too: Until 2014, Hale points out, most ESG ETFs were sector funds largely focused on environmental issues. Today, there are 56 sustainable diversified equity ETFs. The universe of bond funds with an ESG focus has also expanded.

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