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How Funds Can Make a Difference

Your investments have power

How you invest your money can be a vote for the values you want to support—from fairness and equality to safety and sustainability. But how does it actually work? How do your mutual funds try to make difference in the world?

There are three strategies that mutual funds have been using for years:

1. Divestment: Avoid objectionable companies

For many years, funds relied on divestment. They avoided investing in certain companies or industries, like tobacco or more recently, fossil fuels. Divestment is still an important tool, but most investors want to do more than just avoid ‘bad apples’; they want to actively support companies that are trying to do the right thing.

2. Investment: Seek out companies that are trying to make a positive impact

Today, many funds invest in companies that have strong environmental, social or corporate governance policies (ESG). This is a way for the fund to mitigate risk. A company that is mismanaged could end up facing major fines or lawsuits. And importantly, it also allows fund investors to put their money behind the kinds of companies they want to support.

3. Engagement: Work with companies to help them move forward

Perhaps the most important way that funds are making a difference is by tapping into their power as shareholders. When you invest in a company, you get a say in how that company operates: you can file shareholder resolutions to try to change how a company operates, and you can vote on these proposals at shareholder meetings, and that’s exactly what many funds do. They invest in a company with the goal of engaging with the company and helping it do better.

How fund companies have made a positive impact

Investors filed more than 400 proposals just on environmental and social issues in 2015 alone, according to the US Forum on Sustainable Investing (USSIF). These efforts have led to some real results. They have persuaded hundreds of companies to make significant improvements. Here are just a few of their success stories:

Fewer harmful chemicals in children’s products

Domini Impact Investments engaged with Target to encourage the company to reduce the use of toxic PVC plastic in children’s products. (Other major retailers, like Walmart and Sears, soon followed suit.) Today, Target has a sustainable product standard that scores 7,000 products based on toxicity.

More efficient energy use

Calvert Research and Management has prioritized engagement with electric utilities and 53 major corporations have committed to source 100% of their power from renewable energy in the next two decades.

Smarter use of natural resources

Trillium Asset Management engaged with Home Depot, which was one of the world’s largest retailers of old-growth lumber at the time. Home Depot agreed to use more sustainably sourced wood, and by 2009, Home Depot had sold more Forest Stewardship Council (FSC)-certified wood than any other company in North America.

The FundX Funds are funds of funds and do not invest directly in any individual companies.

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About FundX

FundX Investment Group pioneered using noload mutual funds to manage client accounts in 1969. Today, the firm uses its evidence-based investment process to manage equity, sustainable and fixed income portfolios of funds for individuals, institutions and mutual funds.


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