5 Large Cap ESG Mutual Funds
Economic, Social, and Governance Responsible Large Cap Funds
Large businesses are under intense scrutiny from more than regulators. Responsible business practices are becoming necessary to attract investors. Corporate social responsibility (CSR)—the morally guided actions of corporations—has been replaced by the concept of ESG (environmental, social, governance) responsible corporations.
In an age where the focus on business is purpose rather than money, shareholders and stakeholders want to know what large businesses are doing to help the current world-wide environmental crises. Analysts have begun to classify investment opportunities with ESG ratings, to assist investors.
Mutual funds have long been known for their diversity and stability. To continue being an attractive investment to ESG investors, mutual funds need to be socially responsible in their ability to create returns on investment.
The Morningstar ESG Classification
Morningstar is a global financial services firm that provides many options and analyses for viewing on a very large number of stocks. They have developed their own rating system for ESG investing, which many other financial organizations have adopted.
There are many different methods of classifying investments as ESG responsible funds. While not impossible to list them all, it would be a rather large list. Here is a brief look at five large capitalization mutual funds, rated by Morningstar and other financial firms as ESG responsible.
Parnassus Core Equity Investor
Managed by Parnassus Investments, this fund steers clear of fossil fuel seeking ventures. Its net assets are worth over $17.5 billion. According to its prospectus:
The Fund is fossil-fuel free, as it does not invest in companies that derive significant revenues from the extraction, exploration, production or refining of fossil fuels...
The fund's advisors also use their own ESG criteria to evaluate each company it invests in. The fund's top five holdings are Microsoft, The Walt Disney Co., Danaher Corp., Mastercard, and American Express.
Jensen Quality Growth Fund Class J (JENSX)
Jensen Investment Management selects companies that meet their strict standards of quality and sustainability. The company is known for a commitment to its long-term strategies and ability to weather economic downturns.
Jensen has one of the higher sustainability scores from Morningstar, giving investors assurance of good long-term investment and responsibility in investing.
The fund's top five holdings include Pepsico, Microsoft, United Technologies Corp, Becton Dickinson and Co., and Johnson & Johnson.
American Funds American Mutual Fund Class F-1 (AMFFX)
This fund is managed to stay away from alcohol and tobacco driven companies, among other techniques for responsibility.
Their net assets are close to $59 billion, and they have a Morningstar sustainability score of 47, which puts them above average in ESG classification.
Top holdings in the fund are Microsoft, Verizon, Amgen, Abbott Laboratories and Proctor & Gamble.
MainStay Large Cap Growth Fund Class A (MLAAX)
Managed by a team at Winslow Capital, this fund has holdings in well-known corporations that are ESG responsible or are taking actions to become more so. Microsoft, Amazon, Alphabet Inc., Visa, and Apple are in its top five holdings.
The fund has total net assets of $11.6 billion, and holdings in 49 firms.
ClearBridge Large Cap Growth Fund Class A (SBLGX)
This fund is managed by a team at Legg Mason Global Asset Management. Similar to other funds mentioned in this list, it's holdings are designed around large companies that are focusing on becoming more ESG responsible.
The fund has a MorningStar ESG rating of 48, placing it in the high category for responsibility. Its top five holdings are Amazon, Microsoft, Facebook, Visa and UnitedHealth Group.
The Future of SRI
Over the past few years, large firms have struggled while value investors have been on the rise. Value investors are looking for more than just monetary returns—they want to see what companies are doing to reduce their environmental impact, increase the measures they take to give back to society and hold their executives accountable.
Expect this trend to continue in the years to come as sustainability, anti-corruption, and consumer welfare issues increasingly become relevant to large businesses.