Liquidity in socially responsible funds pale in comparison to conventional funds

Betterment SRI Portfolio Strategy

Liquidity in socially responsible funds pale in comparison to conventional funds

Betterment SRI Portfolio Strategy

Manji April 2, 2020


  1. Introduction
  2. I. How do we define SRI?
  3. II. The State of Socially Responsible Investing in 2017
  4. III. How is Betterment’s SRI portfolio constructed?
  5. IV. How socially responsible is the SRI portfolio?
  6. V. Should we expect any difference in an SRI portfolio’s performance?
  7. Conclusion
  8. Footnotes

In today’s market, there are many challenges to address when building an SRI portfolio. One of the most significant of these challenges: SRI is still an emerging field, and its growing demand is a relatively recent phenomenon.

Betterment’s approach to SRI is aspirational. We’ve created a portfolio strategy designed to be iterated on over time, without sacrificing core principles of our advice: balanced cost and proper diversification. Despite the nascent state of SRI, Betterment’s portfolio represents a diversified, low-cost SRI solution that will be continually improved upon as data, costs, and SRI funds improve.

To develop our SRI portfolio, we had to research, analyze, and ultimately answer five important questions:

  • How should we define SRI for this portfolio?
  • What are the challenges for implementing SRI today?
  • Which SRI funds are among the best for an effective portfolio?
  • How should we assess the “social responsibility” of an SRI portfolio?
  • Should we expect any difference in an SRI portfolio’s performance?

The resulting answers to these questions, explained in the sections that follow, informed how we created the Betterment SRI Portfolio for our customers.

I. How do we define SRI?

Our approach to SRI has two fundamental dimensions:

  1. Reducing exposure to companies involved in non-socially responsible activities and environmental, social, or governmental controversies.
  2. Increasing investments in companies that work to address solutions for core environmental and social challenges in measurable ways.

We chose to define our SRI approach using a set of industry criteria known as ESG, which stands for Environmental, Social and Governance. 

You may have seen SRI and ESG used interchangeably in financial literature. But, experts will point out that there is a clear distinction between how each term is defined. 

ESG refers specifically to the quantifiable dimensions of socially responsible investing among each of the three components. In our SRI portfolio, we use ESG factors to define and score the degree to which our portfolio is socially responsible.

Using ESG Factors to Define an SRI Approach

A significant and obvious aspect of improving a portfolio’s ESG score is reducing exposure to companies that engage in undesirable activities in your investment portfolio. Companies can be considered undesirable because their businesses do not align with specific values—e.g. selling tobacco, military weapons, or civilian firearms.

Other companies may be undesirable because they have been involved in recent and ongoing ESG controversies and have yet to make amends in a meaningful way.

ESG controversies include:

  • Environmental controversies related to energy and climate change, land use, biodiversity, toxic spills and releases, water stress, and/or operational waste. A recent example is the BP (Deepwater Horizon) oil spill from 2010.
  • Corporate governance controversies involving fraud, bribery, and controversial investments. A recent example is Wells Fargo’s recent controversy where the company may have created as many as 3.5 million fraudulent accounts in the last 15 years.
  • Labor controversies like discrimination and other violations of International Labor Organization standards. For example, the class action lawsuit against Sterling Jewelers, alleging gender discrimination and sexual harassment within the company.
  • Customer controversies involving anticompetitive practices, privacy and data security, and product safety. Remember the massive Yahoo data security breach from 2016 where 500 million user accounts were hacked?

SRI is about more than just adjusting your portfolio to minimize companies with a poor social impact. Based on the framework of MSCI, a leading provider of ESG data and analytics, a socially responsible investment approach also emphasizes the inclusion of companies that have a high overall ESG score, which represents an aggregation of scores for multiple thematic issues across E, S, and G pillars as shown in Table 1 below.

Table 1. A Broad Set of Criteria Across E, S and G pillars

3 Pillars 10 Themes 37 Key ESG Issues
Environment Climate Change Carbon Emissions
Energy Efficiency
Product Carbon Footprint
Natural Resources Water Stress
Biodiversity & Land Use
Pollution & Waste Toxic Emissions & Waste
Electronic Waste
Packaging Material & Waste
Environmental Opportunities Opportunities in Clean Technology
Opportunities in Renewable Energy
Opportunities in Green Building
Social Human Capital Labor Management
Human Capital Development
Health & Safety
Supply Chain Labor Standards
Product Liability Product Safety & Quality
Privacy & Data Security
Chemical Safety
Responsible Investment
Financial Product Safety
Health & Demographic Risk
Stakeholder Opposition Controversial Sourcing
Social Opportunities Access to Communications
Access to Health Care
Access to Finance
Opportunities in Nutrition & Health
Governance Corporate Governance Board*
Corporate Behavior Business Ethics
Corruption & Instability
Anti-Competitive Practices
Financial System Instability
* Board, Pay, Ownership, and Accounting carry weight in the ESG Rating model for all companies. Currently, they contribute to the Corporate Governance score directly and 0-10 sub-scores are not available.

Source: MSCI

II. The State of Socially Responsible Investing

Although using ESG factors to select portfolio funds may sound like a brilliantly straightforward, quantitative approach to constructing a portfolio, unfortunately, in today’s market, there are a number of limitations that plague the process of executing SRI. In spite of these limitations, we still strive to maximize the expression of your SRI values with some of the best available investing tools.

For Betterment, three limitations had a large influence on our overall approach to building an SRI portfolio:

1. Poor quality data underlying ESG scoring.

Because SRI is still gaining traction, data for constructing ESG scores are at a nascent stage of development. There are no uniform standards for data quality yet.

Some companies disclose data on the various ESG metrics, others don’t. And companies that do disclose their data may do so in inconsistent ways. As a result, ESG metrics may not necessarily capture the desired concepts and ideals with 100% accuracy.

In order to standardize the process of assessing companies’ social responsibility practices, Betterment uses ESG factor scores from MSCI, an industry-leading provider of financial data and ESG analytics that has served the financial industry for more than 40 years. MSCI collects data from multiple sources, company disclosures, and over 1,600 media sources monitored daily. They also employ a robust monitoring and data quality review process.[1] By adopting MSCI’s framework for calculating ESG metrics, we’re putting our best foot forward toward assuring the data is as accurate as currently possible.

2. Many existing SRI products on the market have serious shortcomings.

Many SRI portfolio products today can be categorized in one of two ways:

  1. Products that sacrifice sufficient diversification required by long-term investors.
  2. Products that invest based on competing ESG issues and themes, resulting in inconsistent SRI principles.

Some solutions do not use a diversified range of asset classes—for example, holding mostly or entirely US Large Cap stocks–or invest only in individual stocks. At Betterment, diversification is a fundamental pillar of our advice, and we do not believe it’s in an investor’s best interest to offer an under-diversified portfolio.

In the second case, some SRI firms aim to promote specific ESG issues or themes using a combination of SRI ETFs. Too often, however, this approach leads to offsetting positions in the same asset class, reducing the focus and effectiveness of the portfolio. For example, a portfolio that holds the SHE ETF, which invests in companies that rate highly in terms of gender diversity, currently holds Pfizer stock. The DSI ETF, however, screens out Pfizer from its stock holdings (as noted below). Any SRI portfolio that held both of these ETFs would not achieve either ETF’s intention of whether an investor should hold Pfizer stock. This is a pitfall of an SRI approach that lacks a coherent methodology within an asset class. 

Our approach has the advantage that it leads to diversified portfolios at a relatively low cost. Our SRI portfolios are also built around ETFs that capture a broad set of ESG themes based on one coherent methodology for US Large Cap stocks, International Developed stocks and Emerging Market stocks. 

As such, we do not expect to run into the contradictory SRI exposures within the same asset class resulting from holding multiple SRI ETFs that each focus on different ESG themes. This broad ESG theme coverage may not meet the needs of every investor, but it can have major advantages for long-term investors over other approaches.

3. Few SRI-oriented ETFs have sufficient liquidity.

In an effort to control the overall cost for SRI investors, a large portion of our research focused on low-cost exchange-traded funds (ETFs) oriented toward SRI. As with any of our portfolios, we aim to maximize investors’ take-home returns by lowering the costs of the underlying funds.

While SRI-oriented ETFs indeed have relatively low expense ratios compared to SRI mutual funds, our analysis quickly revealed insufficient liquidity in many ETFs currently on the market. Without sufficient liquidity, every trading execution becomes more expensive, creating a drag on returns. Median daily dollar volume is one way of measuring liquidity. Higher volume on a given asset means that you can quickly buy (sell) more of that asset in the market without driving the price up (down). 

Of course, the degree to which you can drive the price up or down with your buying or selling must be treated as a cost that can drag down on your returns. Figures 1 and 2 below put the liquidity issues associated with trading two of the most widely traded SRI ETFs—ESGD and DSI—into perspective by comparing their liquidity to the liquidity of other ETFs used in Betterment portfolios.

In balancing cost and value for the SRI portfolio, the options were limited to funds that focus on US stocks with large market capitalization—also referred to as US Large Cap stocks, Developed Market stocks, and Emerging Market stocks.

Accordingly, DSI, SUSA, ESGU, ESGD, and ESGE are the ETFs with SRI mandates that we have selected for the SRI portfolio. They have the largest AUM among broadly diversified SRI options, and our investment selection process shows that they have the highest liquidity relative to their size in the Betterment SRI portfolio.

Liquidity in socially responsible funds pale in comparison to conventional funds

Figure 1. In this figure we compare the median daily dollar volumes of the primary funds in current Betterment core IRA portfolios against those of ESGD and DSI. As you can see, every fund that we currently trade in the Betterment portfolios has liquidity that far surpasses that of ESGD or DSI. Data: Factset. Median dollar value traded is measured over the past 45 trading days over the period ending October 13, 2019.

Liquidity is concentrated in the top few SRI funds

Liquidity is concentrated in the top few SRI funds

Figure 2. ESGD, DSI, and ESGE are more liquid than other fund options with SRI mandates. SRI-oriented bond ETFs currently lack sufficient liquidity for inclusion in the Betterment SRI portfolio. The most widely traded SRI funds lack adequate trading volume. The market for socially responsible bond funds will need to develop further before there are a sufficient number of funds with sufficient liquidity to make them candidates for inclusion in Betterment’s SRI portfolio.

III. How is Betterment’s SRI portfolio constructed?

We are taking steps toward socially responsible investing even if the currently available fund products do not necessarily present the ideal solutions. Overall, in order to meet our requirements for lower cost and higher liquidity, our SRI portfolio focuses on companies that rate highly on a scale that considers all three ESG pillars. In order to maintain geographic diversification and factor tilts toward value and smaller cap companies, we continue to allocate to funds that do not have SRI mandates.

How does the SRI portfolio compare to Betterment’s core portfolio?

When compared to Betterment’s core portfolio, there are two main changes. First, both taxable and tax-deferred portfolios replace our current US Large Cap stock exposure with an allocation to a broad US ESG stock market ETF (DSI). Two other broad US ESG stock market ETFs (SUSA and ESGU) serve as the alternative tickers for DSI, which are utilized by Tax-Loss Harvesting+ (TLH+).

Second, both taxable and tax-deferred portfolios replace our current Emerging Market stock exposure and Developed Market stock exposure with a broad emerging market ESG fund (ESGE) and a broad Developed Market ESG fund (ESGD), respectively. Because of limited liquidity among other Emerging Market and Developed Market SRI funds, market-capitalization based funds are used as alternative tickers for TLH+.

DSI, SUSA, ESGU, ESGD, and ESGE each track a benchmark index that screens out companies involved in specific activities and selectively includes companies that score relatively highly across a broad set of ESG metrics [2]. The benchmark index for DSI explicitly filters out companies involved in tobacco, military weapons, civilian firearms, GMOs, nuclear power, alcohol, and adult entertainment. SUSA benchmark index screens out tobacco companies and companies that have run into recent ESG controversies (a few examples were mentioned earlier). ESGD, ESGE, and ESGU exclude tobacco companies, certain weapons companies (such as those producing landmines and bioweapons), and companies undergoing severe business controversies.

Our value and small cap factor tilts, as well as our allocations to bonds, continue to be expressed using non-SRI focused ETFs since either the corresponding SRI alternatives do not exist or may lack sufficient liquidity. These non-SRI funds continue to be part of the portfolios for diversification purposes.

An example of how a Betterment SRI portfolio for IRA accounts at a 70% stock allocation, with its primary tickers, is shown in Figure 3. Taxable portfolios are similar but with the replacement of US Total Bond Market exposure (BND primary) by US Municipal bonds (MUB primary) as is implemented currently for Betterment core portfolios.

Figure 3. Betterment SRI Portfolio for IRA – 70% Stock Allocation

Figure 3. Betterment SRI Portfolio for IRA – 70 Percent Stock Allocation

Based on the primary ticker holdings, the following are the main differences between Betterment’s SRI portfolios and core portfolios:

  • Removal of exposures to the US total stock market (VTI) and US large cap value (VTV).
  • Incorporation of DSI in order to replace the US large cap stock exposures within VTI. DSI also completely absorbs the allocation to VTV of Betterment core portfolios.
  • Addition of VOT and VBK in order to account for mid cap and small cap growth allocations within VTI.
  • Maintenance of allocations to VOE and VBR so as to account for the mid cap and small cap value allocations within VTI and the value tilt of Betterment core portfolios.
  • Replacement of market cap-based developed market stock fund, VEA, with SRI-focused emerging market stock fund, ESGD.
  • Replacement of market cap-based emerging market stock fund, VWO, with SRI-focused emerging market stock fund, ESGE.

SRI portfolios can also support our core products for increasing after-tax returns, Tax-loss Harvesting+ and Tax-coordinated portfolios (TCP). Because of limited fund availability in the developed and emerging market SRI spaces, we use market cap-based funds, like VWO, SPEM, VEA, and IEFA as secondary and tertiary funds for ESGE and ESGD when TLH is enabled.

Limitations of our approach

The ESG Scoring approach to SRI does not fully eliminate companies that investors interested in SRI may consider undesirable. As of the end of May of 2017, for example, both DSI and SUSA included some energy companies that engage in oil and natural gas exploration, like Hess. While Hess might rate relatively poorly in terms of the “E” of ESG, it could still rate highly in terms of the “S” and the “G.” Furthermore, for diversification purposes, we’re still holding funds in the portfolios that do not have SRI mandates for both domestic and international bond exposure, as mentioned earlier.

We are committed to achieving more socially responsible investing through our research over time and are tracking the availability of better vehicles for these purposes. This is simply the beginning of a conversation: customers interested in SRI can signal to the investing world that there is a demand for high quality SRI investment options and may help to encourage the development of well-diversified, low-cost SRI funds in a wider variety of asset classes. Since originally launching the SRI portfolio in 2017 with ESG exposure to only US Large Cap stocks, we’ve been able to expand the exposure to now cover also Developed Market stocks and Emerging Market stocks. As always, we will continue to monitor for additional ways to improve our portfolio.

IV. How socially responsible is the SRI portfolio?

The stocks of US Large Cap companies deemed to have a negative social impact are clearly removed from the SRI portfolio. As of July 3, 2017, companies such as BP, Exxon, Chevron, Philip Morris, Wells Fargo, Walmart, and Pfizer are not among the stock holdings of the SRI portfolios [3].

Exclusion of the stocks of BP, Exxon and Chevron should be obvious, as they are all oil companies. So is the exclusion of the stock of a large tobacco company like Phillip Morris. Wells Fargo, Walmart, and Pfizer all suffer from scoring poorly in terms of the social dimension and/or corporate governance [3], according to ESG scores.

As mentioned earlier, we use the ESG data and analytics from MSCI to quantify how SRI-oriented our portfolios are. For each company that they cover, MSCI calculates a large number of ESG metrics across multiple E, S, and G pillars and themes (recall Table 1 above). All these metrics are first aggregated at the company level to calculate individual company scores. At the fund level, an overall MSCI ESG Quality score is calculated based on an aggregation of the relevant company scores. This fund level ESG Quality score reflects “the ability of the underlying holdings to manage key medium- to long‐term risks and opportunities arising from environmental, social, and governance factors” [4]. These fund scores can be better understood given the MSCI ESG Quality Score scale shown below.

Table 2. The MSCI ESG Quality Score Scale

The ESG Quality Score measures the ability of underlying holdings to manage key medium- to long-term risks and opportunities arising from environmental, social, and governance factors.
Scale 0-10 Score
8-10 Very high ESG quality — underlying holdings largely rank best in class globally based on their exposure to and management of key ESG risks and opportunities
6-8 High ESG quality — underlying holdings largely rank above average globally based on their exposure to and management of key ESG risks and opportunities
4-6 Average ESG quality — underlying holdings rank near the global peer average, or ESG quality of underlying holdings is mixed
2-4 Low ESG quality< — underlying holdings largely rank below average globally based on their exposure to and management of key risks and opportunities
0-2 Very low ESG quality — underlying holdings largely rank worst in class globally based on their exposure to and management of key ESG risks and opportunities

Source: MSCI

Based on data from MSCI (courtesy of, US Large Cap stock, Emerging Market and Developed Market stock holdings of our SRI portfolios have an MSCI ESG Quality score that is approximately 43% higher on average relative to those of Betterment core portfolios. 

The data shown in Table 3 and the scale presented in Table 2 show that, on average, while current Betterment core portfolios hold US Large Cap, Developed and Emerging Market stocks that are of Average ESG quality, SRI portfolios invest in US Large Cap, Developed and Emerging Market stocks that are of high ESG quality.

MSCI ESG Quality Scores

U.S. Stocks – Large Cap

Betterment Portfolio: 5.28

DSI: 6.92

SUSA: 8.51

ESGU: 6.97

Emerging Markets Stocks

Betterment Portfolio:3.83

ESGE: 6.34

Developed Markets Stocks

Betterment Portfolio: 6.79

ESGD: 8.34

Table 3. Sources: MSCI courtesy of, values accurate as of November 14, 2019 and are subject to change.

A Note on ESG Risks and Opportunities

An ESG risk captures the negative externalities that a company in a given industry generates that may become unanticipated costs for that company in the medium- to long-term. An example of such a risk is the possible need to reformulate if a company’s product due to a regulatory ban on a key chemical input. An ESG opportunity for a given industry is considered to be material if companies will capitalize over a medium- to long-term time horizon [5]. Examples of ESG opportunities include the use of clean technology for the LED lighting industry.

For a company to score well on a key ESG issue (see Table 1 above), both the exposure to and management of ESG risks are taken into account. The extent to which an ESG risk exposure is managed needs to be commensurate with the level of the exposure. If a company has high exposure to an ESG risk, it must also have strong ESG risk management in order to score well on the relevant ESG key issue. A company that has limited exposure to the same ESG risk, only needs to have moderate risk management practices in order to score as highly. The converse is true as well. If a company that is highly exposed to an ESG risk also has poor risk management, it will score more poorly in terms of ESG quality than a company with the same risk management practices, but lower risk exposure.

For example, water stress is a key ESG issue. Electric utility companies are highly dependent on water with each company more or less exposed depending on the location of its plants. Plants located in the desert are highly exposed to water stress risk while those located in areas with more plentiful water supplies present lower risk. If a company is operating in a location where water is scarce, it needs to take much more extensive measures to manage this risk than a company that has access to abundant water supply.

V. Should we expect any difference in an SRI portfolio’s performance?

One might expect that a socially responsible portfolio could lead to lower returns in the long term compared to another, similar portfolio. The notion behind this reasoning is that somehow there is a premium to be paid for investing based on your social ideals and values.

A study by the Royal Bank of Canada (RBC) from 2012, however, shows that based on a comprehensive literature review, this claim is questionable at best. This paper summarizes the results from 16 different SRI studies and in most cases, the performance of SRI funds did not differ significantly from that of non-SRI funds. The authors of the RBC study also show, as in Figure 4, that the KLD 400 Index (i.e., the benchmark index for DSI) slightly outperformed the S&P 500 (the quintessential benchmark for US Large Cap stocks) over the period April 1990 to April 2012. They note however that the return between the two indices can be meaningfully different, in both positive and negative directions, over shorter time periods. For example, the authors claim that, over one year periods, return differences of ± 2% are common and can be as large as ± 5%.

Figure 4. KLD 400 vs. S&P 500 – April 1990 to April 2012


Source: Royal Bank of Canada

When considering the possible performance of Betterment’s SRI portfolio, we examined evidence based on both historical and forward-looking analyses. When adjusting for the stock allocation level, the data indicate that the performance of Betterment’s SRI portfolio versus our core portfolio is not significantly different.

Backtests Based on Historical Returns

Past performance does not guarantee future results. Nonetheless, our analysis of historical returns is consistent with our assertion that the performance of SRI portfolios should track the performance of the core portfolios very closely. An analysis of the historical total gross returns over the past ten years [6] shows that SRI portfolios and core portfolios have been very highly correlated. In Figure 5 we illustrate this high correlation using IRA portfolios at a 70% stock allocation as an example. Both Taxable and IRA portfolios exhibit similar properties given other stock allocation levels.

Backtested Returns Are Highly Correlated

Based on historical returns of a 70% stock allocation portfolio gross of all fees for the period ending November 13, 2019.

But how do the net returns compare? In Figure 6 we show that the weighted expense ratios of SRI portfolios are higher than those of core portfolios at non-zero stock allocation levels (and the spread increases as you add more stocks to the mix). You might expect that the higher expense ratios would drag down the net performance of SRI portfolios relative to core portfolios.

Weighted Expense Ratios for all IRA Portfolio Allocations

Weighted Expense Ratios for all IRA Portfolio Allocations

Figure 6. Sources: Factset and author’s calculations as of November 13, 2019.

As it turns out, after reducing returns both by weighted expense ratios and a 0.25% annual Betterment fee, the performance of SRI portfolios ended up being about the same as that of core portfolios for the recent ten year period ending on October 30, 2019. Table 3 provides an example of this claim for IRA portfolios at a 70% stock allocation. Performance summaries for other stock allocation levels as well as for taxable portfolios look similar.

Comparing Net Performance

70% Stock Allocation Portfolios for Ten Year Period ending October 30, 2019
Betterment Portfolio Betterment SRI Portfolio
Annualized Return (net) 7.44% 7.28%
Annualized Standard Deviation 9.64% 9.60%

Source: Xignite, author’s calculations.

Forward-looking Analysis

In Figure 7, we graph expected net total returns at each risk (stock allocation) level for both Betterment core and SRI portfolios. All expected total returns are expressed in annual terms and are net of the portfolio weighted ETF annual expense ratios and a 0.25% annual Betterment fee. Based on the application of Black-Litterman and mean-variance portfolio optimization methods, they are our best estimates of the actual returns, net of known fees, that you might expect to achieve on average annually. The expected net total returns of SRI portfolios are only slightly below those of Betterment core portfolios. The higher weighted expense ratios of SRI portfolios primarily account for their expected underperformance.

Figure 7. Comparison of Efficient Frontiers

Figure 7. Comparison of Efficient Frontiers

Assumes a risk-free rate of 1.76%

Sources: Market capitalization data collected from S&P Dow Jones Indices, SIFMA, and Bank for International Settlements. Price data are from Yahoo Finance. A risk-free rate assumption of 1.76% is for a 10-year horizon and is derived using our methods for estimating the forward curve. Calculations are by the Betterment Investing Team.

Dividend Yields Could Be Lower

Dividend yields calculated over the past year (ending November 13, 2019) indicate that income returns coming from SRI portfolios have been lower than those of core portfolios recently (see Figure 8). Oil and gas companies like BP, Chevron, and Exxon, for example, currently have relatively high dividend yields and excluding them from a given portfolio can cause its income return to be lower. Of course, future dividend yields are random variables and past data may not provide accurate forecasts. Nevertheless, lower dividend yields can be a factor in driving total returns for SRI portfolios to be lower than those of core portfolios.

Figure 8. Comparison of Dividend Yields

Figure 8. Comparison of Dividend Yields

Source: Yahoo Finance, author’s calculations for one year period ending November 13, 2019.


SRI portfolios are designed to help you express your values and social ideals through your investments. Despite the various limitations that SRI portfolios face today, Betterment wants to support its customers in meeting their desires for more socially responsible vehicles for investing. 

We are now able to provide you with a globally diversified SRI portfolio at relatively low cost that is expected to track the performance of long-standing Betterment core portfolios closely. You can think of this current SRI product offering as only the start of our SRI journey. We are actively seeking to make this product more socially responsible over time as demand grows for the relevant products and as new SRI solutions become available.

[1] See the ESG Ratings Methodology Executive Summary for more detail.

[2] DSI’s benchmark index is the MSCI KLD 400 Social Index. For more details on its construction see the MSCI methodology. SUSA benchmark index is the MSCI USA ESG Select Index. More detailed information on its construction methodology can be found here. ESGE’s benchmark index is the MSCI Emerging Markets Extended ESG Focus Index. More detailed information on its construction can be found here.

[3] See for example. Note that Wells Fargo has also been embroiled in a scandal involving the creation of fake customer accounts.

[4] See for more detail.

[5] See MSCI ESG Ratings Methdology (February 2017) for more detail.

[6] Total gross returns are monthly and correspond to the ten-year period ending June 30, 2017. Historical total gross returns include dividends and are gross of fund fees and the 0.25% annual Betterment fee.

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