Small Cap Funds for Sustainable and Responsible Investing
Small cap funds are gaining popularity among investors who are looking for sustainable and responsible investments. These funds invest in companies with market capitalization less than $2 billion. They are considered high-risk, high-reward investments, but they can also be a great way to diversify your investment portfolio.
What is sustainable and responsible investing?
Sustainable and responsible investing (SRI) is an investment strategy that takes into consideration environmental, social and governance (ESG) factors. It seeks to invest in companies that are good stewards of the environment and society while also maintaining profitable businesses. Some of the key areas of focus for SRI investors include climate change, human rights, labor standards, corporate governance, and community engagement.
Why invest in small cap funds?
Small cap companies have historically outperformed large-cap companies over long periods of time. One reason for this is that small cap companies are able to grow and innovate more quickly than their larger counterparts. They are often more nimble and able to react to changes in the market more quickly than large cap companies. Small cap companies can also be great investments for those who are looking for exposure to niche industries or emerging markets.
In addition, small cap funds can be a great way to invest in sustainable and responsible companies. Smaller companies often have a more direct impact on their local communities and may be more aligned with sustainable and responsible practices. By investing in small cap funds, investors can help support companies that are doing good while also looking to maximize their investments.
What are some top small cap funds for sustainable and responsible investing?
1. Brown Advisory Sustainable Small Cap Fund (BIAWX)
The Brown Advisory Sustainable Small Cap Fund seeks to invest in companies that are leaders in ESG practices. The fund aims to provide investors with long-term capital appreciation while also considering the impact of its investments on society and the environment.
2. Calvert Small Cap Fund (CASCX)
Calvert Small Cap Fund is a fund that invests in companies with market capitalization less than $3 billion. The fund aims to invest in companies with strong ESG practices and has a focus on companies that are aligned with United Nations Sustainable Development Goals.
3. Parnassus Small Cap Fund (PARWX)
The Parnassus Small Cap Fund invests in companies with market capitalizations of less than $4 billion. The fund focuses on companies that are leaders in ESG practices, and its investment strategy seeks to invest in companies that are making a positive impact on society and the environment.
What are some risks associated with investing in small cap funds?
Small cap funds are considered high-risk, high-reward investments because of the volatility associated with small cap companies. These funds can be more sensitive to market changes, and there is a higher risk of companies going bankrupt. Additionally, small cap companies may have a higher cost of capital which can limit their ability to grow.
Investors should carefully consider their risk tolerance and investment objectives before investing in small cap funds. It is important to diversify your investment portfolio and consider all of your options before making any investment decisions.
In conclusion, small cap funds can be a great way to invest in sustainable and responsible companies while also diversifying your investment portfolio. These funds can provide exposure to niche industries and emerging markets while also seeking to invest in companies with strong ESG practices. However, it is important to carefully consider your risk tolerance and investment objectives before investing in small cap funds.