Ethical concerns are an increasingly pressing consideration for many investors who want to put their money into companies that match their beliefs and values.
As terms such as "environment, social and governance (ESG)" and "socially" responsible investment (SRI) "hit the mainstream, we've seen the emergence of more exchange-traded funds (ETF & # 39; s) that integrate social responsibility with investing.
Below we will look at ethical investing and ETFs in more detail .. worth considering:
Measuring ESG investment criteria
More companies and investors are becoming aware of the environmental and social impact of their choices in both their professional and personal lives, yet shareholders can have different lines in the sand when it comes to ethical investing.
For example, some avoid so-called sin stocks – companies involved in segments such as tobacco, alcohol, gambling, or firearms, others may avoid companies that may have controversial human rights issues such as violate trials, nuclear energy development or intensive, environmentally unfriendly agriculture. Understandably, companies that harm the environment regularly make headlines.
Political tendencies can also influence portfolio choices. Some may prefer companies with generally positive social behavior rather than excluding stocks based solely on specific products or practices.
Since ethical investing can be seen through the lens of what companies do, and what they don't do & # 39; In practice, there are different definitions with significant differences.
The principles of corporate social responsibility (CSR) must be expressed in measurable variables, but because there is no concept of sustainability, for example, there is no generally accepted method of measuring it.
Worldwide, various non-profit initiatives or member organizations have also introduced guidelines to ensure consistency in the disclosure of environmental information. However, these standards are currently not perfectly standardized.
There is a wide range of investment options, such as the Index Series, launched in 2001 that measures the performance of companies with ESG practices. A complete list of these indexes can be found on the FTSE Russell website.
Total assets managed globally in late 2019 using one or more sustainable investing strategies exceeded $ 30 trillion. Let's take a closer look at all that.
1. Vanguard ESG US Stock ETF
Current Price: $ 61.06
52-week range: $ 38.85 – 61.08
Dividend Yield (TTM after twelve months): 0.94%
Dividend distribution frequency: quarterly
Expense Ratio: 0.12% per year, or $ 12 on an investment of $ 10,000
The Vanguard ESG US Stock Fund (NYSE 🙂 which holds 1,464 holdings, attempts to track the performance of the FTSE US All Cap Choice index.
] The fund is screened for certain ESG criteria and specifically excludes shares of companies in the following sectors: adult entertainment, alcohol, tobacco, weapons, fossil fuels, gambling and nuclear energy. In addition, shares of individual companies that do not meet certain diversity criteria and the principles of the United Nations Global Compact are not included.
The main sectors (by weight) are technology (30.90%), financial institutions (16.70%), consumer services (15.40%), health care (14.60%) and consumer goods (8 , 10%). These five sectors make up more than 85% of the fund.
The top ten holdings make up 27.5% of total net assets, which is approximately $ 1.6 billion. ESGV's three main companies are Microsoft (NASDAQ :), Apple (NASDAQ 🙂 and Amazon (NASDAQ :).
Year-to-date (YTD), the fund has risen more than 7%. On August 5, it reached a record high of $ 61.08.
2. iShares MSCI Global Impact ETF
Current Price: $ 75.35
52-week range: $ 50.42 – 76.08
Dividend yield (12-month TTM trailing): 1.14%
Dividend distribution frequency: every six months
Expense ratio: 0.49% per year, or $ 49 on an investment of $ 10,000
iShares MSCI Global Impact ETF (NASDAQ 🙂 with 120 shares follows the MSCI ACWI Sustainable Impact index.
This benchmark index is composed of positive impact companies that derive a majority of their revenues from products and services that address at least one of the world's greatest social or environmental challenges as identified by the objectives of the United Nations for sustainable development, such as education or climate change.
The main sectors (by weight) are consumer goods (18.50%), healthcare (17.75%), industry (17.46%), consumer goods (16.95%) and materials (11, 01%). These five sectors make up 82% of the fund.
The ten largest holdings make up 40.5% of total net assets, or about $ 145 million. SDG's three largest companies are Tesla (NASDAQ :), Nio (NYSE 🙂 and Vestas Wind Systems (CSE :).
YTD, the fund has risen more than 14%. Earlier in July, it reached a record high of $ 76.08.
Bottom Line
The investor community is increasingly considering environmental, social and corporate governance criteria to generate competitive long-term financial returns with a positive societal impact.
We believe that socially responsible investing has strong stamina and that this discourse and the number of related ETFs is likely to increase in the coming years.
