Intro
Environmental, social and corporate governance or ESG investing is an increasingly popular trend among modern investors who are looking to make a positive impact while shoring up their finances for the future. As the climate crisis looms, many of us are seeing both the ethical and economic value of companies that are environmentally conscious and take the threats of climate change and pollution seriously.
However, ESG investing isn’t limited to climate issues only. If a company aims to become a sound ESG investment, then it must fulfill its social and governance responsibilities as well. Social criteria include treating your employees, customers and suppliers fairly, and avoiding unethical practices such as the inclusion of child or slave labour in the supply chain. Governance criteria are more focused on providing strong leadership, regular and transparent audits, and protecting shareholders' rights.
A key idea of ESG investing is that if a company is doing all it can to be a force for good, then it should be more resilient as a whole. It’s this resilience that attracts seasoned investors to the ESG market, while its ethical focus works to attract many new or younger investors for whom social and environmental impact is a heartfelt concern.
However, how do you know if an investment opportunity fulfills ESG criteria? And where can you go to find these ESG investments in the first place? To make it easy to get your foot in the ESG door, we at BrokerChooser have put together an ESG Index, making it easier than ever to find the best broker for ESG investments.
The top ESG brokers for 2022
Having considered a wide range of factors related to ESG investment, such as the quality of ESG research tools and the number of ESG funds and ETFs available, we have put together an index of the best and most accessible ESG brokers in 2022.
1. Interactive Brokers - ESG Index Score: 4.9/5
Interactive Brokers is the best broker for ESG investing, having received an overall ESG Index Score of 4.9. There are high-quality research tools available through the Impact Dashboard on the Client Portal (Interactive Brokers’ web trading platform) and the IMPACT mobile app. You can personalize your ESG goals by selecting the values that are most important for you, and Interactive Brokers’ scoring algorithm will tell if your portfolio is aligned with these goals. You can also filter for stocks based on values, like clean water or clean air. You can also find an ESG course available on Interactive Brokers’ Traders’ Academy.
Trading fees are really favorable, and you can select more than 300 ESG ETFs and over 300 ESG funds. One tool we missed is a screener for ESG ETFs or funds.
2. Fidelity - ESG Index Score: 4.9/5
Tied for first place, having also scored 4.9, is Fidelity, which benefits from high-quality research tools, including a great screener for ESG funds and ETFs. You can trade stocks and ETFs for low fees, while Fidelity also offers up to 200 ESG ETFs and nearly 300 ESG funds for investors to choose from.
3. Merrill Edge - ESG Index Score: 4.8/5
In third place is Merrill Edge, which received an overall ESG Index Score of 4.8. Merrill Edge benefits from extremely low fees and a similarly high standard of research tools as Fidelity. However, one downside is that Merrill Edge has a much smaller offering of ESG funds than Fidelity.
The top ESG brokers with the best trading apps
ESG investing is a popular entry point for new investors, many of whom have never considered investing before. These new traders can now benefit from simple and easy-to-use platforms that allow them to invest with confidence.
With that in mind, we thoroughly checked the quality of each broker’s trading app, incorporating user reviews as well as our own expert analysis of each application. We then combined this data with our ESG Index ranking to reveal the top ESG brokers with the best apps.
1. Fidelity - ESG Index App Score: 9.50/10
Fidelity is the best ESG broker for trading via an app, having received an impressive score of 9.50. Fidelity was always going to be hard to beat, and while Fidelity’s app didn't receive the absolute highest score in our own assessment, they did score very high in terms of user reviews.
2. Merrill Edge - ESG Index App Score: 9.42/10
Merrill Edge is the second best broker for ESG investing on your phone, scoring an impressive 9.42 out of 10. Again, with a strong ESG Index performance, Merrill Edge was always going to be hard to beat, but its app performed well both in our in-depth analysis and among Apple App Store users. However, it was held back by its score on Google Play Store, which, while positive, wasn't high enough to send it to the top.
3. E*TRADE - ESG Index App Score: 9.04/10
In third place is E*TRADE, which received an overall ESG Index App Score of 9.04. The E*TRADE app was one of the best-reviewed on both Google Play Store and Apple’s App Store, while it received a rating of 4.5 in our own expert assessment. Combined with a very strong ESG score, E*TRADE looks to be a great place to invest in ESG while on the go.
Interactive Brokers' IMPACT mobile app is also a great ESG app to use. We found it to be user-friendly and you can find many tools that help your ESG investments. The main reason Interactive Brokers didn't make it to the top 10 list is that there are no available Google Play and Apple scores for the app yet.
Why is ESG important?
ESG investing is a powerful force for change, as it combines a very human need to create a better world, both environmentally and socially, with the hard reality of economics. As such, ESG provides economically-driven change that is sustainable in the long run as it doesn’t rely on charitable donations and goodwill alone.
Not only does this model incentivise investors to support green companies and industries, but it equally empowers activists to take action and claim a financial stake in the green revolution. As this system of investing rewards ethical companies and green technology, it could become the driving force behind the global effort to save the planet.
However, care must be taken not to be fooled by attempts at greenwashing that seek to pass off unsustainable practices as good for the environment. There can also be dilemmas related to projects that are considered socially positive but environmentally destructive, such as the building of social housing in green areas. This means that the ESG value of a company or investment can be often difficult to assess.
At the end of the day, ESG investment is a force for good that unites investors and activists to drive economically sustainable change. By using trusted brokers with the best research tools, you'll be able to navigate this exciting investment space and make a difference by considering aspects other than your strict bottom line.
Methodology
Our goal was to find out which brokers are the best for ESG investing. To do this, we ranked them using a score that was calculated using a wide range of factors including each broker’s education and research tools, their fee levels, and the number of ESG products available.
In addition, we looked at each broker’s smartphone app to see how it makes ESG investment accessible to new investors. To find out which brokers are the best for ESG trading via a mobile app, we incorporated our own in-depth review of each broker’s app, as well as the user review scores that each app received on Google Play Store and Apple's App Store.
Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.
