Robo-Advisors Go Green—How Automated Platforms Are Pushing Sustainable Investing in North America

Algorithmic wealth managers finally discovered ESG exists—now they’re selling it to millennials like oat milk lattes.

The rise of checkbox ethics

Automated platforms from Wealthsimple to Betterment now tout ’sustainable’ portfolios. But dig deeper and you’ll find fossil fuel giants still lurking in ’low-carbon’ ETFs—because Wall Street’s version of green still runs on crude.

Borderless greenwashing?

US investors get SEC-mandated disclosures while Canadians navigate TSX-listed ESG funds. Both markets share one trait: funds labeled ’sustainable’ that somehow still include Big Oil.

The cynical take

When a robo-advisor claims 0.1% fee ESG investing will save the planet, remember: they’d sell coal-powered retirement plans if regulators allowed it.

The Leading Robo-Advisors in the US and Canada

The automated investment landscape in both the United States and Canada features a variety of platforms catering to different investor needs and preferences. Understanding the key players in each market is crucial for investors considering sustainable options.

Top Robo-Advisors in the US

The United States boasts a mature and competitive robo-advisor market, with several prominent platforms managing significant assets. Vanguard Digital Advisor stands out as one of the largest, with over $333 billion in assets under management (AUM) as of 2024. Other leading robo-advisors include Betterment, managing approximately $46 billion in AUM, and Wealthfront, with around $36 billion in AUM. Fidelity Go is another significant player, offering a simple and low-cost approach to automated investing. Acorns, while having a smaller AUM of $8. billion, boasts the largest number of clients at 5. million, highlighting its popularity among smaller investors. SoFi Automated Investing and Schwab Intelligent Portfolios are also notable platforms, offering various features and fee structures. Key features across these platforms often include low management fees, automatic portfolio rebalancing, and tax-loss harvesting for eligible accounts. Some platforms, like Vanguard Personal Advisor Services and Betterment Premium, also offer the option to access human financial advisors for a more personalized experience. The presence of these large players indicates a high level of acceptance and trust in automated investment solutions among US investors. The initial entry of pioneers like Betterment and Wealthfront, followed by the integration of robo-advisory services by established financial institutions such as Vanguard and Fidelity, has created a diverse market with options now increasingly including sustainable investing.

Top Robo-Advisors in Canada

The Canadian robo-advisor market has also seen significant growth, offering a range of choices for investors. Wealthsimple has emerged as a leading platform, managing a substantial amount of assets and known for its user-friendly interface and focus on socially responsible investing. Questwealth Portfolios, the robo-investing arm of Questrade, is recognized for its low fees. Justwealth is another prominent player, distinguished by its wide selection of portfolios, including numerous ESG options. RBC InvestEase and BMO SmartFolio, offered by two of Canada’s largest banks, provide automated investment solutions with a growing emphasis on responsible investing. Other notable Canadian robo-advisors include CI Direct Investing, known for its range of assets, Qtrade Guided Portfolios, and Nest Wealth, which employs a unique flat monthly fee structure. The Canadian market mirrors the US trend of increasing adoption of robo-advisors, with a strong focus on low fees and a growing availability of sustainable investment options. The participation of major banks in this space further underscores the increasing mainstream acceptance of automated investment platforms in Canada.

Sustainable Investing Choices on US Automated Platforms: A Detailed Exploration

Several leading robo-advisors in the United States offer dedicated sustainable investing options, allowing investors to align their portfolios with their environmental, social, and governance values.

Betterment

Betterment provides investors with a choice of three distinct Socially Responsible Investing (SRI) portfolios: Broad Impact, Climate Impact, and Social Impact. The Broad Impact portfolio invests in companies that rank highly on overall ESG criteria. The Climate Impact portfolio focuses on companies with lower carbon emissions and those involved in green projects. The Social Impact portfolio emphasizes companies actively working towards minority empowerment and gender diversity. A key component of Betterment’s SRI portfolios is the $VOTE ETF from Engine No. 1, a low-cost fund that empowers investors to advocate for their values through activist proxy voting. Betterment’s standard management fee is $4 per month for balances under $20,000 or 0.25% annually for balances above $20,000, with a premium option available at 0.65% for balances over $100,000. By offering these thematic SRI portfolios, Betterment enables investors to select options that resonate with their specific impact preferences, demonstrating an understanding that sustainable investing encompasses a range of values.

Wealthfront

Wealthfront offers a dedicated Socially Responsible portfolio designed around sustainability, diversity, and equity. This portfolio comprises a diversified mix of ETFs, including the iShares ESG Aware MSCI USA ETF (ESGU) for US stocks, the iShares ESG Aware MSCI EAFE ETF (ESGD) for foreign developed stocks, the iShares ESG Aware USD Corporate Bond ETF (SUSC) for corporate bonds, the iShares ESG Aware MSCI EM ETF (ESGE) for emerging market stocks, and the Schwab US TIPS ETF (SCHP) for Treasury Inflation-Protected Securities. Wealthfront’s approach focuses on providing a low-cost, expert-built portfolio that is automatically managed, including rebalancing and dividend reinvestment, and optimized for tax savings in taxable accounts through tax-loss harvesting. The platform charges a standard annual advisory fee of 0.25% and requires a minimum investment of $500 for automated investing accounts. Wealthfront’s strategy of providing a single, well-diversified SRI portfolio simplifies the choice for investors seeking a broad sustainable approach without needing to focus on specific themes.

Vanguard Digital Advisor

Vanguard Digital Advisor provides an ESG investment option that utilizes funds applying pre-screened ESG criteria defined by third-party index providers. To ensure diversification, this strategy also includes certain non-ESG bond ETFs for international and domestic bond exposure. The specific ESG ETFs used in this option are the ESG U.S. Corporate Bond ETF (VCEB), the ESG U.S. Stock ETF (ESGV), and the ESG International Stock ETF (VSGX), alongside the non-ESG Total International Bond ETF (BNDX). Vanguard Digital Advisor offers a low advisory fee, approximately 0.15% annually for the all-index option, with the ESG option having a net advisory fee ranging from 0.11% to 0.20%. The minimum investment required to enroll in the service is $100. Vanguard’s offering makes sustainable investing accessible through its renowned low-cost ETF structure, providing an affordable entry point for a wide range of investors interested in ESG principles.

Fidelity Go

Fidelity Go offers a range of sustainable investment funds within its automated platform, catering to investors with specific environmental or social interests. Examples of these funds include the Fidelity Sustainable Target Date Funds, which invest in a diversified mix of sustainable assets that adjust over time based on the target retirement date; the Fidelity Climate Action Fund (FCAEX), which focuses on companies mitigating climate change; and the Fidelity Women’s Leadership Fund (FWOMX), which invests in companies prioritizing women’s leadership. Fidelity Go employs a tiered fee structure, with no advisory fee for balances under $25,000 and a 0.35% annual fee for balances of $25,000 or more. There is no minimum required to open an account, and you can start investing with as little as $0. Fidelity’s extensive selection of thematic sustainable funds within its robo-advisor platform provides investors with targeted options to align their investments with particular sustainability concerns.

Acorns

Acorns provides ESG portfolio options built with iShares ETFs by BlackRock, focusing on companies with higher ESG ratings across environmental, social, and governance factors. These portfolios are designed with a focus on diversification and risk tolerance, similar to Acorns’ Core portfolios. Acorns operates on a subscription-based fee model, with plans ranging from $3 to $12 per month, depending on the features and services included. There is no account minimum required to begin investing with Acorns. Acorns’ approach offers a simplified entry into sustainable investing, particularly for those new to investing, with its low barrier to entry and emphasis on ESG ratings provided by a leading ETF issuer.

SoFi Automated Investing

SoFi Automated Investing offers a “Sustainable” portfolio theme that allows customers to invest in stocks of companies aligned with environmental, social, and governance criteria. This option provides investors with a way to make an impact with their money while utilizing an automated investment strategy. SoFi charges a low annual advisory fee of 0.25% and has a minimum investment requirement of just $50. Notably, SoFi’s platform also includes alternative investment options in some of its portfolios, which is less common among robo-advisors. SoFi’s offering presents a cost-effective and accessible route to sustainable investing, with the added potential for diversification through alternative assets.

Schwab Intelligent Portfolios

While Schwab Intelligent Portfolios does not offer a dedicated SRI portfolio, it provides access to a selection of ESG mutual funds. These funds employ various approaches to ESG investing, including values-based investing (excluding certain companies), integration (considering ESG risks in the investment process), and impact investing (aiming for specific positive outcomes). A key feature of Schwab Intelligent Portfolios is that its basic service charges no advisory fee, although it does allocate a portion of the portfolio to cash, which can impact returns. The platform has a higher minimum investment requirement of $5,000 for its basic service. While not a dedicated SRI portfolio, Schwab’s offering allows investors to incorporate sustainability into their investment strategy through a range of available ESG mutual funds within a fee-free automated platform.

M1 Finance

M1 Finance offers a highly customizable approach to Socially Responsible Investing (SRI) through its “Pie” structure. This platform allows investors to create personalized portfolios, or “Pies,” composed of individual stocks and ETFs that align with their specific values and ESG criteria. M1 Finance is known for its low fees and flexible portfolio options, providing investors with a high degree of control over their investment strategies. This level of customization makes M1 Finance a compelling option for investors who want to actively curate their sustainable investment choices.

Exploring Ethical Investing

Canadian investors also have access to a growing number of automated platforms offering sustainable and ethical investing options, reflecting the increasing demand for values-aligned investments in the country.

Wealthsimple

Wealthsimple is a popular choice for Canadians seeking socially responsible investing, offering a dedicated SRI portfolio. This portfolio is designed to align with the temperature-change goals of the IEA Sustainable Development Scenario (SDS) and the Paris Agreement. Wealthsimple goes beyond simply investing in the “least bad” companies by eliminating the top 25% of carbon emitters in each industry and ensuring that every company in their SRI funds has at least 25% or three women on their board of directors. The portfolio utilizes Wealthsimple’s own socially responsible ETFs, including WSRI (US and Canadian stocks), WSRD (European, Asian, and Australian stocks), and WSGB (Green and social bonds). Wealthsimple employs a tiered fee structure, ranging from 0.4% to 0.5% depending on the account balance, and has no minimum investment requirement. Wealthsimple’s strong emphasis on SRI, including specific and ambitious criteria, and its accessibility with no minimum investment, make it a leading platform for sustainable investing in Canada.

Questwealth Portfolios

Questwealth Portfolios offers a suite of Socially Responsible Investing (SRI) portfolios across different risk levels: Aggressive, Growth, Balanced, Income, and Conservative. These portfolios invest in various types of ETFs focused on social and corporate governance, low carbon emissions, and clean technology. Questwealth boasts low management fees, ranging from 0.20% to 0.25% depending on the account balance, and requires a minimum investment of $1,000. By providing SRI options across a range of risk profiles and with very competitive fees, Questwealth makes sustainable investing accessible to a broad spectrum of Canadian investors with varying investment goals and risk tolerances.

Justwealth

Justwealth distinguishes itself with a goals-based approach and a wide selection of over 80 different portfolios, including various ESG options. Investors are paired with a Personal Portfolio Manager who helps assess their objectives and build a tailored ETF portfolio, which can include ESG-focused funds. Justwealth’s management fees range from 0.4% to 0.5%, and the minimum investment is $5,000, with exceptions for RESP and FHSA accounts. Recognized for its extensive portfolio selection and personalized service, Justwealth caters to Canadian investors with specific needs and preferences in sustainable investing.

RBC InvestEase

RBC InvestEase offers Responsible Investing portfolios that focus on companies with high ESG scores and exclude those involved in certain controversial industries such as tobacco and weapons. These portfolios are built using iShares ESG Aware ETFs. RBC InvestEase charges a management fee of 0.5% and has a low minimum investment requirement of $100 to start investing. As the robo-advisor platform of the Royal Bank of Canada, RBC InvestEase provides a convenient and accessible option for Canadians who prefer to invest with a well-established financial institution while aligning their investments with responsible practices.

CI Direct Investing

I Direct Investing provides dedicated ESG portfolios with different asset allocations, such as Aggressive ESG and Growth ESG. These portfolios primarily invest in passive ETFs that follow ESG-oriented investment strategies. CI Direct Investing’s management fees range from 0.35% to 0.6%, and the minimum initial investment is $100. By utilizing passive ESG ETFs, CI Direct Investing offers a cost-effective approach for investors looking to integrate ESG principles into their portfolios through diversified, low-cost funds.

Qtrade Guided Portfolios

Qtrade Guided Portfolios offers Responsible Investing (RI) options where portfolio managers analyze companies based on ESG criteria to create diverse, responsible portfolios. This approach goes beyond simply tracking market indices and involves a more active consideration of ESG factors in investment decisions. Qtrade Guided Portfolios charges management fees ranging from 0.35% to 0.6% and has a minimum investment requirement of $2,000 to start investing. Qtrade’s RI offering provides a more actively managed approach to sustainable investing, potentially appealing to investors seeking deeper ESG integration.

BMO SmartFolio

BMO SmartFolio offers a suite of ESG ETFs, including stock, bond, and balanced funds, providing a market-leading range of sustainable investment solutions. As the robo-advisor platform of BMO Global Asset Management, it leverages the bank’s extensive experience in responsible investing. BMO SmartFolio’s management fees range from 0.4% to 0.7%, and the minimum investment is $1,000. With its broad selection of ESG ETFs, BMO SmartFolio provides Canadian investors with numerous options for building diversified and sustainable portfolios within a well-established financial institution.

Nest Wealth

Nest Wealth takes a responsible investment approach by integrating ESG factors into their portfolio construction and investment decisions. They believe that considering environmental, social, and governance risks and opportunities can lead to better long-term financial returns. Nest Wealth employs a flat monthly fee structure, ranging from $5 to $150 depending on the account balance, and has no minimum investment requirement. Nest Wealth’s unique fee structure and commitment to ESG integration make it a distinctive option in the Canadian robo-advisor market.

Performance and Fees: Evaluating Sustainable Investing Options on Robo-Advisors

When considering sustainable investing options on automated platforms, investors naturally want to understand how these portfolios have performed and what fees are associated with them.

Comparing the historical performance of sustainable portfolios across different platforms reveals varying results. For instance, Betterment’s Broad Impact portfolio showed a total return of +82.3% and an annualized return of +7.9% based on a hypothetical $50,000 investment. Wealthsimple’s SRI portfolio projected an annualized return of 8.2% based on historical data. Questwealth’s Aggressive SRI Portfolio reported an 88.59% return since its inception in November 2018. Justwealth’s ESG High Growth Portfolio indicated a 3-year return of -2.83% as of a certain date. RBC InvestEase’s Responsible Investing Aggressive Growth portfolio showed a performance since inception of 9.6%. It is important to note that performance data can vary significantly depending on the specific portfolio, its asset allocation, the time period considered, and overall market conditions. While some analysis suggests that SRI and ESG portfolios can perform comparably to or even outperform traditional portfolios , past performance is not a guarantee of future results, and investors should conduct their own research and consider their individual risk tolerance and investment objectives.

Analyzing the fee structures associated with sustainable investing options indicates that, in most cases, the management fees charged by the robo-advisors for their services are the same for both standard and sustainable portfolios. For example, Wealthsimple charges the same management fees (0.4%-0.5%) for its SRI portfolio as it does for its conventional portfolios. Similarly, Questwealth Portfolios charges the same management fees (0.20%-0.25%) for its SRI options as for its regular portfolios. RBC InvestEase also has the same annual management fee of 0.5% for both its Standard and Responsible Investing portfolios. However, the underlying ETF fees, known as the Management Expense Ratio (MER), within SRI or ESG portfolios might be slightly higher in some instances due to the specific ETFs used. For example, Questwealth’s SRI portfolios have portfolio MERs ranging from 0.21% to 0.35%, which is slightly higher than the 0.17%-0.22% range for their regular portfolios. RBC InvestEase’s Responsible Investing portfolios have MERs ranging from 0.18% to 0.23%, compared to 0.11%-0.14% for their Standard portfolios.

Considering whether sustainable options are more expensive requires a cost-benefit analysis. While the underlying ETF costs (MERs) for some sustainable investing options might be marginally higher, the overall cost of investing through robo-advisors, including sustainable options, remains highly competitive, especially when compared to the fees charged by traditional financial advisors. For many investors, the potential for positive environmental and social impact, along with the alignment of their investments with their personal values, can justify a slight increase in the MER of the underlying ETFs. The relatively small difference in costs may be viewed as a worthwhile trade-off for those who prioritize sustainability alongside their financial goals. Moreover, the convenience and accessibility offered by robo-advisors make sustainable investing a viable option for a broader range of individuals, regardless of their investment knowledge or capital.

Key Factors to Consider When Choosing a Sustainable Robo-Advisor

Selecting the right sustainable robo-advisor involves careful consideration of several factors to ensure that the chosen platform aligns with individual values, investment goals, and financial circumstances.

The most crucial factor is the. Investors should first identify which aspects of sustainability – environmental protection, social equity, or good governance – are most important to them. Some may have specific themes they wish to prioritize, such as combating climate change, promoting social impact, or supporting companies with strong ethical practices. Understanding these preferences will help narrow down the platforms that offer portfolios focusing on those specific areas.
Next, it is essential to understand the. Investors should investigate how the robo-advisor selects sustainable investments. Do they rely on ESG ratings provided by third parties, implement specific exclusion criteria (e.g., excluding fossil fuels or companies with poor labor practices), or focus on positive impact themes (e.g., clean energy or gender diversity)? Reviewing the specific ETFs used in the sustainable portfolios and understanding their methodologies is also crucial. This involves looking at the ETF’s investment objective, its underlying holdings, and its approach to incorporating ESG factors.

is another important consideration. Does the platform provide clear and detailed information about the ESG criteria used in their portfolios? Do they offer reporting on the environmental and social impact of the investments, allowing investors to see how their money is contributing to a better future? Transparency in these areas helps investors feel confident that their investments genuinely align with their values.
Investors should also consider the. Comparing the management fees and the Management Expense Ratios (MERs) associated with the sustainable options on different platforms is essential to ensure cost-effectiveness. It is also important to verify that the minimum investment requirements of the platform align with the investor’s available capital.
Finally,can significantly impact the overall investment experience. Choosing a platform that is easy to navigate, provides clear explanations of investment strategies, and offers sufficient educational resources on sustainable investing will empower investors to make informed decisions and manage their portfolios effectively.

The Future of Sustainable Investing in the Automated Landscape

The field of sustainable investing within automated platforms is poised for continued growth and innovation, driven by evolving investor preferences and technological advancements.

Emerging trends and innovations are likely to shape the future of sustainable robo-advisory services. One potential development is the. As investor demand for more specific alignment with their values grows, platforms may offer greater flexibility in tailoring portfolios to individual preferences, allowing investors to select specific ESG factors or impact themes that are most important to them. Another trend could be thewithin robo-advisors. Platforms may begin to offer opportunities to invest in projects or companies with a direct and measurable positive social or environmental impact, going beyond traditional ESG screening. Furthermore, thecould lead to more personalized sustainable investment recommendations. AI could analyze vast amounts of ESG data to match investors with portfolios that closely align with their specific values and risk profiles.

The increasing demand for more tailored and impactful investment options reflects a broader trend among investors who desire. This demand will likely push robo-advisors to provide more detailed information about the impact of their sustainable portfolios and potentially offer tools for investors to track the real-world outcomes of their investments.

Potential regulatory developments in both the US and Canada could also significantly influence the future of sustainable investing in the automated landscape. There is increasing scrutiny and a push for. Regulatory bodies may introduce stricter requirements for how investment platforms define and present their sustainable options, ensuring greater clarity and comparability for investors. This could lead to more standardized ESG labels and reporting metrics across the industry, making it easier for investors to evaluate and compare different sustainable investment products offered by robo-advisors.

Making a Positive Impact with Automated Sustainable Investing

The landscape of automated investment platforms in both the United States and Canada offers a diverse and growing array of sustainable investing options. Leading robo-advisors such as Betterment, Wealthfront, Vanguard Digital Advisor, Fidelity Go, Acorns, SoFi Automated Investing, and Schwab Intelligent Portfolios in the US, and Wealthsimple, Questwealth Portfolios, Justwealth, RBC InvestEase, CI Direct Investing, Qtrade Guided Portfolios, BMO SmartFolio, and Nest Wealth in Canada, provide various avenues for investors to align their financial goals with their environmental, social, and governance values. These platforms offer different approaches, ranging from thematic SRI portfolios and dedicated ESG options to customizable strategies and access to ESG-focused funds, catering to a wide spectrum of investor preferences and priorities.

Automated platforms have empowered investors to easily incorporate sustainable investing into their financial strategies. With features like low fees, low or no minimum investment requirements, and user-friendly interfaces, these platforms have democratized access to values-aligned investing. Whether investors prioritize climate action, social responsibility, or strong corporate governance, there are increasingly sophisticated and accessible options available through robo-advisors. By carefully considering their personal values, understanding the underlying investment methodologies, evaluating transparency and reporting, and comparing fees and minimums, investors in the US and Canada can confidently choose a platform and portfolio that best aligns with their individual financial objectives and their desire to make a positive impact on the world. The future of sustainable investing in the automated landscape looks promising, with ongoing innovation and increasing focus on providing tailored and impactful options for values-driven investors.