Environmental, Social, and Governance (ESG) ETFs have taken center stage to align investment goals with positive societal and environmental impact. As we venture into 2023, the landscape of investment options has evolved, offering a variety of ESG ETFs that not only promise financial returns but also strive to make a difference.
Whether you’re a seasoned investor looking to incorporate ethical considerations into your portfolio or a newcomer curious about the power of conscious investing, join us as we unveil the top 10 ESG ETFs poised to make waves in the year ahead. Beyond just financial growth, these funds embody the spirit of progress, aiming to forge a more sustainable and equitable future while potentially redefining how we view profitability in finance.
What Are ESG ETFs?
ESG ETFs are funds that invest in companies that meet certain environmental, social, and governance (ESG) standards. These standards can vary from fund to fund, but they typically focus on factors such as greenhouse gas emissions, labor practices, and corporate governance.
ESG ETFs are a way for investors to put their money to work for good while also generating attractive returns. Read on to know what each component of ESG represents:
Environmental (E)
This aspect focuses on a company’s environmental impact. It considers greenhouse gas output, energy effectiveness, trash disposal, and material conservation. Companies with environmentally friendly practices, such as those involved in renewable energy, clean technology, and sustainable resource management, are often favored by ESG investors.
Social (S)
How a business interacts with its stakeholders (including its workers, clients, and local communities) is the focus of the social dimension. Diversity, equity in the workplace, respect for human rights, safety for consumers, and participation in local communities are all assessed. Companies prioritizing employee well-being, diversity, and social responsibility tend to be more attractive to ESG-oriented investors.
Governance (G)
When discussing an organization’s governance, we discuss its leadership system, morals, openness, and responsibility. It examines board composition, executive compensation, shareholder rights, and anti-corruption measures. Companies with strong governance practices are often considered more reliable and trustworthy investments.
The Top 10 ESG ETFs to Buy in 2023
Here is a list of the top 10 ESG ETFs that investors might consider buying in 2023. Please note that the performance and availability of these ETFs can vary over time, so it’s recommended to conduct thorough research before making any investment decisions.
1) iShares ESG Aware MSCI USA ETF (ESGU)
The MSCI USA ESG Leaders Index is followed by the actively held iShares ESG Aware MSCI USA ETF (ESGU). The index tracks big and mid-cap U.S. stocks that are also responsible corporate citizens. These standards include environmental impact, social responsibility, and corporate governance criteria.
ESGU has a low expense ratio of 0.18% and total assets under management of over $10 billion. It has a 5-year annualized return of 14.5%, slightly below the S&P 500’s 15.6% return over the same period.
If you want to invest in environmentally, socially, and governance (ESG)-friendly U.S. enterprises without breaking the bank, ESGU is a solid choice. It has broad exposure to the U.S. market and a low expense ratio, making it a good value for investors.
2) iShares ESG Aware MSCI EAFE ETF (ESGD)
The iShares ESG Aware MSCI EAFE ETF (ESGD) is an exchange-traded fund (ETF) that passively follows the MSCI EAFE ESG Leaders Index. Large and medium-sized corporations from industrialized nations that are up to ESG requirements are included in the index. These standards include environmental impact, social responsibility, and corporate governance criteria.
ESGD has a low expense ratio of 0.20% and total assets under management of over $3 billion. It has a 5-year annualized return of 12.0%, slightly below the MSCI EAFE Index’s 12.8% return over the same period.
Buyers seeking a low-cost, diversified approach to investing in ESG firms in developed markets might consider ESGD. It has broad exposure to developed markets and a low expense ratio, making it a good value for investors.
3) iShares ESG Aware MSCI EM ETF (ESGE)
The MSCI Emerging Markets ESG Leaders Index is followed by the inactively handled iShares ESG Aware MSCI EM ETF (ESGE). Companies with big and medium market caps from developing markets that adhere to specified ESG criteria make up the index. These standards include environmental impact, social responsibility, and corporate governance criteria.
With nearly $2 billion in funds under administration and a low-cost ratio of 0.30%, ESGE is an attractive investment option. It has a 5-year annualized return of 8.8%, which is slightly below the MSCI EM Index’s 9.4% return over the same period.
If you want to invest in developing market firms that prioritize environmental, social, and governance considerations but don’t want to break the bank doing it, ESGE is a solid choice. It has a broad exposure to emerging markets and a low expense ratio, making it a good value for investors.
4) Vanguard ESG U.S. Stock ETF (ESGV)
The Vanguard ESG U.S. Stock ETF (ESGV) is a passively managed ETF that tracks the FTSE US All Cap ESG Index. The index is composed of large-, mid-, and small-cap U.S. companies that meet certain ESG standards. In terms of criteria, we’re talking about business social duty, environmental effect, and governance.
With approximately $7 billion in assets under administration and a low cost ratio of 0.10%, ESGV is a formidable investment option. It has a 5-year annualized return of 14.5%, which is slightly below the S&P 500’s 15.6% return over the same period.
If you want to invest in environmentally, socially, and governance (ESG)-friendly U.S. firms but don’t want to break the bank doing it, ESGV is a solid choice. It has a broad exposure to the U.S. market and a low expense ratio, making it a good value for investors.
5) Vanguard ESG International Stock ETF (VSGX)
One such proactively administered ETF is the Vanguard ESG International Stock ETF (VSGX), which follows the FTSE All-World ex-US ESG Index. Companies from the established and developing markets of all sizes (big, medium, and small) that are compliant with a set of ESG criteria make up the index. These standards include environmental impact, social responsibility, and corporate governance criteria.
VSGX has a low expense ratio of 0.12% and total assets under management of over $1 billion. It has a 5-year annualized return of 11.5%, which is slightly below the MSCI All Country World ex-US Index’s 12.6% return over the same period.
If you’re seeking for a diverse, low-cost, multinational ESG-friendly company investment option, VSGX is a solid choice. It has broad exposure to developed and emerging markets and a low expense ratio, making it a good value for investors.
6) iShares ESG Aware U.S. Aggregate Bond ETF (EAGG)
The Bloomberg Barclays US Aggregate ESG Index is followed by the passively managed iShares ESG Aware U.S. Aggregate Bond ETF (EAGGG). The index includes only high-quality U.S. bonds that also adhere to environmental, social, and governance criteria. These standards include environmental impact, social responsibility, and corporate governance criteria.
EAGG has a low expense ratio of 0.15% and total assets under management of over $100 million. It has a 5-year annualized return of 5.0%, slightly below the Bloomberg Barclays US Aggregate Bond Index’s 5.4% return over the same period.
For those seeking a low-cost, diversified investment alternative in environmentally, socially, and governance-friendly (ESG) U.S. bonds, EAGG is a solid choice. It has broad exposure to the U.S. bond market and a low expense ratio, making it a good value for investors.
7) SPDR S&P 500 ESG ETF (SPYX)
The SPDR S&P 500 ESG ETF (SPYX) is a passively managed ETF that tracks the S&P 500 ESG Index. This index tracks significant U.S. firms that are also responsible corporate citizens. These standards include environmental impact, social responsibility, and corporate governance criteria.
SPYX has a low expense ratio of 0.10% and total assets under management of over $10 billion. It has a 5-year annualized return of 14.5%, slightly below the S&P 500’s 15.6% return over the same period.
SPYX is a good option for investors looking for a low-cost, diversified way to track the performance of the S&P 500 with an ESG tilt. It has a low expense ratio and broad exposure to the U.S. market, making it a good value for investors.
8) Invesco ESG ETF (IUSG)
The Invesco ESG ETF (IUSG) is a passively managed ETF that tracks the MSCI USA ESG Leaders Index.
Included in the index are major and minor corporations operating in the US that are also ESG-compliant. These standards include environmental impact, social responsibility, and corporate governance criteria.
IUSG has a low expense ratio of 0.15% and total assets under management of over $1 billion. It has a 5-year annualized return of 14.5%, slightly below the S&P 500’s 15.6% return over the same period.
IUSG is a good option for investors looking for a low-cost, diversified way to track the performance of the U.S. market with an ESG tilt. It has a low expense ratio and broad exposure to the U.S. market, making it a good value for investors.
9) iShares MSCI Europe ESG Leaders ETF (EUNL)
The MSCI Europe ESG Leaders Index is being followed by the iShares MSCI Europe ESG Leaders ETF (EUNL), a passively managed exchange-traded fund. Large and medium-sized European enterprises that adhere to environmental, social, and governance (ESG) criteria make up the index. These standards include environmental impact, social responsibility, and corporate governance criteria.
EUNL has a low expense ratio of 0.20% and total assets under management of over $5 billion. It has a 5-year annualized return of 10.0%, slightly below the MSCI Europe Index’s 10.8% return over the same period.
EUNL is a good option for investors looking for a low-cost, diversified way, like btcloopholepro.com, to invest in ESG-friendly European companies. It has broad exposure to developed markets and a low expense ratio, making it a good value for investors.
10) iShares MSCI EM ESG Leaders ETF (EEML)
The iShares MSCI EM ESG Leaders ETF (EEML) is a passively managed ETF that tracks the MSCI EM ESG Leaders Index. Companies with big and medium market caps from developing markets that adhere to specified ESG criteria make up the index. These standards include environmental impact, social responsibility, and corporate governance criteria.
EEML has a low expense ratio of 0.30% and total assets under management of over $2 billion. It has a 5-year annualized return of 9.5%, slightly below the MSCI EM Index’s 10.2% return over the same period.
When seeking a diversified, low-cost approach to invest in developing market firms that are both socially and environmentally responsible, EEML is a smart alternative. It has broad exposure to emerging markets and a low expense ratio, making it a good value for investors.
Conclusion
There has been a recent uptick in using ESG ETFs as a vehicle for good. As we’ve explored in detail, these ETFs represent a fusion of financial growth and ethical values, allowing investors to support companies championing environmental sustainability, social progress, and responsible governance. Whether you’re drawn to the innovation of clean energy, the inclusivity of workplace equality, or the resilience of sustainable bonds, the world of ESG investing opens doors to a more conscious and purpose-driven approach to wealth generation.