An ETF First Cut that seeks out exchange-traded funds classified as following a socially responsible approach to investing.
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The growth of socially responsible investing is evident within the exchange-traded fund (ETF) industry. There has been an increasing number of socially responsible indexes created to classify stocks based on various company-specific traits and investor goals. Some of these indexes have broad environmental, social and governance (ESG) themes while others are more specific, focusing on such things as clean energy, gender equality or foreign markets. 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, 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 Screening section of AAII.com.
The screen identifies socially responsible equity ETFs with below-average expense ratios. A total of 26 ETFs passed the screen as of February 28, 2021. All are classified as index funds.
Investors have not needed to sacrifice doing well to do good. Eight of the passing ETFs rank in the top quintile of their categories for one-year returns, and 10 rank in the second-best quintile. Of the 16 ETFs with three years of returns, 12 have outperformed their category peers as is indicated by the A+ Investor grades of A and B.
Relative to socially responsible mutual funds, these ETFs are cheaper to own. The median expense ratio is just 0.20%.
A+ Investor subscribers can see a current list of socially responsible stock ETFs here.
Socially Responsible ETFs With at Least One Year of Return Data
(Ranked by One-Year Return)
| Fund | Ticker | Annualized Return (%) |
ExpRatio (%) |
TotalAssets ($ Mil) |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Category | ||||||||||||
| 1-Yr | Grade | 3-Yr | Grade | 5-Yr | Grade | 10-Yr | Grade | |||||
| First Trust NASDAQ Cln Edge GrnEngyETF | QCLN | 179.3 | A | 55.8 | A | 39.9 | A | 16.5 | A | 0.60 | 2,947 | Misc Sector |
| VanEck Vectors Low Carbon Energy ETF | SMOG | 117.6 | B | 38.8 | B | 27.8 | B | 11.2 | B | 0.62 | 305 | Misc Sector |
| iShares Global Clean Energy ETF | ICLN | 109.2 | B | 42.4 | A | 27.9 | B | 6.9 | D | 0.46 | 5,792 | Misc Sector |
| First Trust Global Wind Energy ETF | FAN | 55.2 | D | 21.0 | C | 19.5 | D | 10.1 | C | 0.61 | 423 | Misc Sector |
| iShares ESG Aware MSCI USA Small-Cap ETF | ESML | 49.8 | A | — | — | — | — | — | — | 0.17 | 680 | Small Blend |
| Nuveen ESG Large-Cap Growth ETF | NULG | 46.4 | B | 23.6 | A | — | — | — | — | 0.35 | 574 | Large Growth |
| IQ Candriam ESG US Equity ETF | IQSU | 38.8 | A | — | — | — | — | — | — | 0.09 | 368 | Large Blend |
| Vanguard ESG US Stock ETF | ESGV | 38.3 | A | — | — | — | — | — | — | 0.12 | 3,505 | Large Blend |
| iShares MSCI USA ESG Select ETF | SUSA | 37.3 | A | 15.9 | A | 18.1 | A | 13.0 | D | 0.25 | 2,779 | Large Blend |
| SPDR MSCI Em Mkts Fossil Fuel Free ETF | EEMX | 36.1 | A | 6.3 | B | — | — | — | — | 0.30 | 156 | Divers Emg Mkts |
| iShares ESG Aware MSCI EM ETF | ESGE | 35.8 | B | 6.7 | A | — | — | — | — | 0.25 | 6,977 | Divers Emg Mkts |
| iShares ESG Aware MSCI USA ETF | ESGU | 35.2 | A | 15.8 | A | — | — | — | — | 0.15 | 14,558 | Large Blend |
| iShares ESG MSCI EM Leaders ETF | LDEM | 34.5 | B | — | — | — | — | — | — | 0.16 | 846 | Divers Emg Mkts |
| SPDR SSGA Gender Diversity ETF | SHE | 34.2 | B | 13.4 | C | — | — | — | — | 0.20 | 200 | Large Blend |
| iShares MSCI KLD 400 Social ETF | DSI | 33.3 | B | 15.4 | A | 17.2 | B | 13.3 | C | 0.25 | 2,810 | Large Blend |
| Goldman Sachs JUST US Large Cap Eq ETF | JUST | 32.7 | B | — | — | — | — | — | — | 0.20 | 198 | Large Blend |
| Xtrackers S&P 500 ESG ETF | SNPE | 32.0 | C | — | — | — | — | — | — | 0.10 | 481 | Large Blend |
| SPDR S&P 500 Fossil Fuel Rsrv Free ETF | SPYX | 31.6 | C | 14.4 | B | 17.1 | B | — | — | 0.20 | 973 | Large Blend |
| FlexShares STOXX Glbl ESG Impact ETF | ESGG | 31.1 | B | 11.6 | A | — | — | — | — | 0.42 | 158 | Wld Large Stock |
| iShares MSCI ACWI Low Carbon Target ETF | CRBN | 30.4 | C | 10.8 | B | 14.4 | B | — | — | 0.20 | 689 | Wld Large Stock |
| iShares ESG MSCI USA Leaders ETF | SUSL | 30.4 | C | — | — | — | — | — | — | 0.10 | 3,007 | Large Blend |
| Xtrackers MSCI USA ESG Leaders Eq ETF | USSG | 30.3 | C | — | — | — | — | — | — | 0.10 | 3,198 | Large Blend |
| Vanguard ESG International Stock ETF | VSGX | 26.8 | A | — | — | — | — | — | — | 0.15 | 1,785 | Foreign Lg Blend |
| IQ Candriam ESG International Equity ETF | IQSI | 25.5 | B | — | — | — | — | — | — | 0.15 | 154 | Foreign Lg Blend |
| SPDR MSCI EAFE Fossil Fuel Free ETF | EFAX | 23.0 | C | 4.9 | C | — | — | — | — | 0.20 | 180 | Foreign Lg Blend |
| iShares ESG Aware MSCI EAFE ETF | ESGD | 22.9 | C | 5.4 | C | — | — | — | — | 0.20 | 4,598 | Foreign Lg Blend |
|
Source: AAII/Morningstar. Data as of 2/28/2021. |
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