Environmental, social and governance ETFs let investors put their money in socially responsible companies without having to do any of the legwork of identifying and vetting their stocks. Like all ETFs, ESG funds bring sweet tax advantages over mutual funds, they cost a whole lot less and they spread all your eggs out into lots of different baskets with the purchase of a single share.
They cost more than the cheapest mainstream index funds, but they don’t have to cost a lot. Depending on the fund’s criteria, ESG-themed ETFs can include anything from small-cap stocks in emerging markets to funds with top holdings dominated by companies like Microsoft and Amazon. Using a variety of sources, GOBankingRates identified some of the most promising ESG-themed funds on the market. You’ll notice that many of them are new, and that’s because this hot ETF category is still emerging. Read on to meet the ETFs that can grow your money without dinging your conscience.
Vanguard ESG U.S. Stock ETF (ESGV)
Vanguard’s ESG ETF gets to bat leadoff for its impressive expense ratio alone, which is par for the course for Vanguard. Its VOO ETF, one of the biggest S&P 500 funds in the game, costs just 0.03%. With an expense ratio of 0.12%, ESGV isn’t that dirt cheap, but considering the average fee for similar funds is 0.83%, ESGV is the difference between $283 and $1,893 in fees you’ll pay on $10,000 invested over 10 years. It’s done well by its investors, too, gaining nearly 20% since its inception in September 2018.
iShares ESG Aware MSCI EM ETF (ESGE)
Blackrock’s iShares brand is up there with Vanguard among the biggest names in the ETF world, and ESGE’s $7.26 billion in assets under management is the proof. With a respectable expense ratio of 0.25%, it’s a great way to get broad exposure to international large- and mid-cap stocks from emerging markets. Among its socially responsible business involvement screens are tobacco, controversial weapons, civilian firearms, thermal coal and oil sands. The fund is dominated by companies from China, Taiwan and South Korea.
American Century Sustainable Equity ETF (ESGA)
This fund is not going to be for everyone. It’s an actively managed fund, which means it benefits from the guiding hands of real, professional fund managers. Despite being actively managed, however, its expense ratio is a tolerable 0.39%. But it’s unlike virtually any other ESG ETFs out there — or most ETFs in general, actually. Most ETFs reveal their holdings to the public every day. ESGA does not. That kind of secrecy comes with risks, but it provides protection against other traders copying the fund’s strategy and lowering its value. Focusing on mid-cap growth stocks with a concentration on ESG, it has gained more than 30% since its 2020 inception.
Nuveen ESG Mid-Cap Growth ETF (NUMG)
Unlike ESGA, NUMG is a passively managed index fund, but its expense ratio is a comparable 0.40%. Also like ESGA, it earns its bread and butter in mid-cap growth stocks. Nuveen’s parent company is TIAA, and NUMG tracks the TIAA ESG USA Mid-Cap Growth Index. With 62 stocks that place a heavy focus on information technology, the ETF has delivered impressive three-year gains of nearly 25% — 21.1% since its inception in December 2016.
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Nuveen ESG Small-Cap ETF (NUSC)
Also from Nuveen is NUSC, which stands out as one of the few ESG-focused ETFs to concentrate on small-cap stocks. Even so, it’s worth noting that nearly one-third of the fund is comprised of mid-caps. It tracks the TIAA ESG USA Small-Cap Index and includes only U.S. companies that meet the fund’s ESG standards. That includes filters on companies that deal in military weapons, alcohol, tobacco, nuclear power, firearms and gambling. It has an expense ratio of 0.40% and has returned 15.78% since its inception at the tail end of 2016.
SPDR SSGA Gender Diversity Index ETF (SHE)
This fund made its debut in dramatic fashion when State Street — known for its wildly popular SPDR brand of funds — unveiled the now-famous “Fearless Girl” statue on Wall Street. Fittingly, the fund focuses on companies that have women pulling the corporate strings. That includes CEOs and other senior executives, board seats and top management. Its expense ratio is a low 0.2% and it’s approaching 15% returns since its inception in 2016.
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Global X Conscious Companies ETF (KRMA)
One of the coolest and most innovative brands in the ETF world, Global X has fund offerings in segments like robotics and artificial intelligence, cannabis, fintech, cybersecurity, video games and esports and the Internet of Things. It makes sense, then, that Global X would create one of the hottest ESG ETFs on the market. With a manageable expense ratio of 0.43%, it has turned in gains of more than 110% since its inception in 2016, making it one of the best-performing ESG funds you can buy.
Vanguard FTSE Social Index Fund Admiral (VFTAX)
The second Vanguard fund on the list is the FTSE Social Index Fund Admiral — its 0.14% expense ratio is nearly as tiny as that of ESGV. It tracks mid- and large-cap stocks on the FTSE4Good US Select Index and nuclear power, gambling, fossil fuels, adult entertainment, alcohol, tobacco and weapons are all filtered out of its holdings. A new arrival as of 2019, it has delivered gains of more than 26% so far.
Parnassus Core Equity Fund Investor Shares (PRBLX)
Parnassus is a longtime player in the ESG movement and the firm has developed some of the industry’s top research and literature on the subject — and PRBLX wants to serve as your all-the-time ETF. Its stated mission is “to be an all-weather fund by holding high-quality companies with the goal of downside protection during market declines.” Its expense ratio is an uninspiring 0.84%, but it’s beaten the S&P overall since 1992.
Fidelity Sustainability Bond Index (FNDSX)
Bond investors with a slant toward ESG ETFs have plenty of options. Among the best is FNDSX, which tracks the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index. Its expense ratio is a low 0.1%, but make sure you can handle the volatility of the bond market before you put your money down.
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