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5 Best Environmental, Social, and Governance (ESG) ETFs to Invest In
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Investing in ESG-focused ETFs has become increasingly popular as investors seek to align their portfolios with their values while aiming for long-term growth. These funds target companies with strong environmental, social, and governance practices, making them an attractive choice for socially conscious investors.
With that in mind, we have listed 5 of the top ESG-focused ETFs, based on NAV at the time of writing, built to provide investors with exposure to companies that excel in these areas.
Environmental, Social, and Governance (ESG) Focused Exchange Traded Funds (ETFs)
*Note: ETFs are ranked by Net Assets of Funds in USD at the time of writing*
1. iShares ESG Aware MSCI USA ETF
The iShares ESG Aware MSCI USA ETF (ESGU) is designed to provide exposure to U.S. companies with high environmental, social, and governance (ESG) performance relative to their sector peers. It seeks to track the MSCI USA Extended ESG Focus Index, which includes large and mid-cap companies across various sectors. The fund aims to achieve long-term capital appreciation by investing in companies that demonstrate strong ESG characteristics while maintaining sector neutrality to ensure broad market exposure.
Key holdings of this fund include the following companies,
- Apple Inc. (AAPL)
- Microsoft Corp. (MSFT)
- NVIDIA Corp. (NVDA)
- Amazon Com Inc. (AMZN)
- Alphabet Inc. (GOOG)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$12.92 billion | 0.15% | 24.00% | 8.15% | 14.66% |
iShares ESG Aware MSCI USA ETF (ESGU +0.45%)
iShares ESG Aware MSCI USA ETF (ESGU +0.45%)
ESGU is managed by iShares, a BlackRock brand known for its extensive range of ETFs and commitment to providing diversified, low-cost investment options. The fund targets a wide range of U.S. companies, ensuring broad market exposure with an emphasis on those meeting high ESG standards.
What sets it apart from direct competitors?
- Low Expense Ratio: ESGU offers one of the lowest expense ratios in the ESG ETF market, making it an attractive choice for cost-conscious investors.
- Sector-Neutral Approach: The fund maintains sector weights similar to those of the broader MSCI USA Index, ensuring comprehensive market exposure while focusing on ESG criteria.
- Comprehensive ESG Integration: The fund excludes companies involved in controversial activities such as tobacco, weapons, and thermal coal, while emphasizing those with superior ESG ratings.
ESGU was launched in December 2016 and has quickly gained popularity for its balanced approach to ESG investing and broad market coverage.
2. Vanguard ESG U.S. Stock ETF
The Vanguard ESG U.S. Stock ETF (ESGV) is designed to track the performance of the FTSE US All Cap Choice Index. The fund focuses on U.S. companies that meet specific environmental, social, and governance criteria, providing investors with a sustainable investment option.
Key holdings of this fund include the following companies,
- Microsoft Corp. (MSFT)
- Apple Inc. (AAPL)
- NVIDIA Corp. (NVDA)
- Amazon.com Inc. (AMZN)
- Meta Platforms Inc. (META)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$8.9 billion | 0.09% | 24.87% | 7.86% | 15.00% |
Vanguard ESG U.S. Stock ETF (ESGV +0.53%)
Vanguard ESG U.S. Stock ETF (ESGV +0.53%)
ESGV is managed by Vanguard, known for its investor-friendly approach and low-cost investment options. The fund targets a broad spectrum of the U.S. market, providing exposure to companies that adhere to high ESG standards.
What sets it apart from direct competitors?
- Low Expense Ratio: ESGV offers one of the lowest expense ratios in the ESG ETF market, making it an attractive choice for cost-conscious investors.
- Broad Market Exposure: The fund provides extensive exposure to U.S. companies that meet stringent ESG criteria, ensuring a well-diversified portfolio.
- Investor-Friendly: Managed by Vanguard, known for its commitment to providing low-cost, high-value investment options.
ESGV was launched in September 2018 and has quickly gained popularity for its cost-effective exposure to U.S. companies that prioritize sustainability and ethical practices.
3. iShares MSCI KLD 400 Social ETF
The iShares MSCI KLD 400 Social ETF (DSI) is designed to track the performance of the MSCI KLD 400 Social Index. The fund focuses on U.S. companies with high environmental, social, and governance (ESG) performance, excluding those involved in controversial activities.
Key holdings of this fund include the following companies,
- Microsoft Corp. (MSFT)
- NVIDIA Corp. (NVDA)
- Alphabet Inc Class A (GOOGL)
- Alphabet Inc Class C (GOOG)
- Tesla Inc. (TSLA)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$4.64 billion | 0.25% | 24.89% | 9.18% | 15.18% |
iShares MSCI KLD 400 Social ETF (DSI +0.4%)
iShares MSCI KLD 400 Social ETF (DSI +0.4%)
DSI is managed by iShares, a brand of BlackRock, which is known for its extensive range of ETFs and commitment to providing diversified, low-cost investment options. The fund targets a wide range of U.S. companies, ensuring broad market exposure with an emphasis on those meeting high ESG standards.
What sets it apart from direct competitors?
- Long Track Record: Launched in 2006, DSI has a long history of providing ESG-focused investments, giving it a robust track record compared to newer ESG ETFs.
- Sector-Neutral Approach: The fund maintains sector weights similar to those of the broader MSCI USA Index, ensuring comprehensive market exposure while focusing on ESG criteria.
- High ESG Standards: The fund excludes companies involved in controversial activities such as tobacco, weapons, and thermal coal, while emphasizing those with superior ESG ratings.
DSI was launched in November 2006 and has established itself as a reliable option for investors seeking ESG-focused investments.
4. iShares Global Clean Energy ETF
The iShares Global Clean Energy ETF (ICLN) is designed to track the performance of the S&P Global Clean Energy Index. The fund focuses on companies involved in the production of clean energy and related technologies, providing investors with exposure to the global clean energy sector.
Key holdings of this fund include the following companies,
- First Solar Inc. (FSLR)
- Enphase Energy Inc. (ENPH)
- Consolidated Edison Inc. (ED)
- Iberdrola SA (IBE)
- Vestas Wind Systems (VWS)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$2.12 billion | 0.41% | -26.11% | -15.99% | 5.91% |
iShares Global Clean Energy ETF (ICLN +1.51%)
iShares Global Clean Energy ETF (ICLN +1.51%)
ICLN is managed by iShares, a brand of BlackRock, which is known for its extensive range of ETFs and commitment to providing diversified, low-cost investment options. The fund targets a wide range of global companies, ensuring broad market exposure with an emphasis on those involved in clean energy production and technology.
What sets it apart from direct competitors?
- Global Reach: ICLN provides exposure to a diversified portfolio of clean energy companies from around the world, not just the U.S., offering a broader scope of investment opportunities.
- Focused Sector: The fund specifically targets the clean energy sector, making it an ideal choice for investors looking to support and benefit from the transition to renewable energy sources.
- Established Track Record: Launched in 2008, ICLN has a long history and track record in the clean energy space, providing stability and reliability compared to newer clean energy ETFs.
ICLN was launched in June 2008 and has grown in popularity due to increasing interest in sustainable and environmentally responsible investments.
5. Xtrackers MSCI USA ESG Leaders Equity ETF
The Xtrackers MSCI USA ESG Leaders Equity ETF (USSG) is designed to track the performance of the MSCI USA ESG Leaders Index. The fund also focuses on U.S. companies with high environmental, social, and governance (ESG) performance relative to their sector peers.
Key holdings of this fund include the following companies,
- Microsoft Corp. (MSFT)
- NVIDIA Corp. (NVDA)
- Alphabet Inc. Class A (GOOGL)
- Alphabet Inc. Class C (GOOG)
- Tesla Inc. (TSLA)
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| ~$1.04 billion | 0.1 | 26.61% | 10.01% | 15.70% |
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG +0.4%)
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG +0.4%)
USSG is managed by DWS, a global asset management company known for its investor-friendly approach and low-cost investment options. The fund targets a broad spectrum of the U.S. market, focusing on companies that adhere to high ESG standards.
What sets it apart from direct competitors?
- Low Expense Ratio: USSG offers one of the lowest expense ratios in the ESG ETF market, making it an attractive choice for cost-conscious investors.
- Sector-Neutral Approach: The fund maintains sector weights similar to those of the broader MSCI USA Index, ensuring comprehensive market exposure while focusing on ESG criteria.
- High ESG Standards: The fund excludes companies involved in controversial activities such as tobacco, weapons, and thermal coal, while emphasizing those with superior ESG ratings.
USSG was launched in March 2019 and has quickly gained popularity for its balanced approach to ESG investing and broad market coverage.
Final Thoughts on ESG ETFs
Investing through an ESG lens is more popular than ever. Not only does the sector provide the potential for sizable returns, but it is also directly linked to the betterment of the world we live in. For those interested in gaining exposure to ESG-focused companies, look no further than the ETFs listed above.
Make sure to visit our look at the top online brokers that can help you invest and gain exposure to what may be lucrative opportunities.
