• Basic Membership Access to Journal, Shadow Stock portfolio & monthly updates for stock screens
  • A+ Investor Full access to AAII.com, Journal, and a power data suite for investment ideas
  • AAII Platinum Full access to all of AAII's model portfolios and premium services at a significant discount
  • Dividend Investing Newsletter and model portfolio that focuses on dividend growth
  • AAII Growth Investing Find secular growth stocks poised for outperformance regardless of macroeconomic conditions.
  • Retirement Investing Discover trusted strategies for every stage of retirement. Get actionable insights and resources for smart retirement planning.
  • Sentiment Investing A research-driven newsletter with 10+ signals decoding sentiment across retail and institutional behavior.
  • Stock Superstars Report Get stock ideas inspired by the market's leading professionals
  • VMQ Stocks For the value investor looking to harness academic research in an actively managed portfolio
  • Bits and Bips Newsletter delivering insights on linking traditional finance, macro trends and cryptocurrency opportunities to help investors build stronger, more diversified portfolios.
All premium products come with free basic membership.
Explore All Membership Options
Join Now
First Cut ETFs Socially Responsible Investing

ESG Equity ETFs

Environmental, social and governance (ESG) investing attempts to match investors’ investments with their beliefs. This month’s ETF First Cut seeks out exchange-traded funds classified as following a socially responsible approach to investing.

by Charles Rotblut | June 2020

Charles Rotblut leads a class in AAII's new Essential Investing Video Course. Go to https://www.aaii.com/ves for more information and to subscribe.


Environmental, social and governance (ESG) investing attempts to match investors’ investments with their beliefs. A growing number of ESG indexes have been created to classify stocks based on various company-specific traits and investor goals. Some of these indexes have broad ESG themes while others are specific, focusing on such things as clean energy or gender equality. As is the case with other indexes, some of the indexes underlying the ETFs listed below are longstanding while others were created to serve as the basis for the purpose of launching an ETF.

Similar to the Mutual Fund First Cut presented here, this month’s ETF First Cut seeks out exchange-traded funds classified as following a socially responsible approach to investing. This screen is one of the several First Cut ETF Screens available to A+ Investor subscribers in the ETFs section of AAII.com.

The screen identifies socially responsible equity ETFs with below-average expense ratios. A total of 21 ETFs passed the screen as of the end of April 2020. All are classified as index funds.

In terms of relative performance, 15 out of the 18 passing ETFs with a full year of data have one-year annual return grades of A or B. These grades signify returns ranking in the top 40% of their respective categories. On a three-year return basis, 11 out of 13 ETFs had a grade of A or B. These grades suggest that it has been possible to do good while doing well. Careful selection is still required as evidenced by poor one- and three-year returns for certain funds. (Three of the passing funds have been in existence for less than 12 months. Only eight of the passing ETFs have been in existence for more than five years. The young median age of these funds is not surprising given that a substantial portion of the ETF industry’s growth occurred after the 2007–2009 financial crisis.)

The 18 ESG exchange-traded funds with at least one full year of returns as of April 30, 2020, are presented in the table below. They are sorted from highest to lowest based on one-year absolute returns.

A+ Investor subscribers can see a current list of socially responsible stock ETFs here. 

Discussion

JOHN L from TX posted over 6 years ago:

Charles Rotblut, why doesn't this article state for the very outset that it is not available to all AAII Journal subscribers but only to those who subscribe to your new A+ program? To fail to do this makes the article a waste of time for many and only an attempt to only gain A+ subscribers.


JOSEPH C from AZ posted over 5 years ago:

He stated it in the second paragraph, "This screen is one of the several First Cut ETF Screens available to A+ Investor subscribers in the ETFs section of AAII.com."


You need to log in as a registered AAII user before commenting.
Create an account

Log In

Get your free copy of our special report analyzing the tech stocks most likely to outperform the market.
Download the FREE Report Here: