Invest in ESG ETFs

There are many different approaches to ESG ETFs, but they are usually segmented into four categories: 

• Exclusion, where companies like fossil fuels companies or tobacco producers are neglected;
• Best-in-class approach which focuses on the most sustainable companies from each sector;
• Full integration approach which can implement both positive and negative screening but what makes them distinct is that they go one step beyond. They integrate ESG at every step and can give more weight to the companies that are ESG leaders and less weight to the companies that need to improve; 
• Thematic ESG ETFs focus on one specific sustainability theme, for example clean energy, sustainable food or gender equality.

Flows into ESG ETFs have increased substantially as investors become more socially conscious. Europe is leading the charge with its ESG-friendly regulations, enticing other governments to join the fight by shifting towards policies that promote the ESG agenda. It’s hard to describe the risk/return profile of ESG ETFs since they encompass a diverse mix of companies from different regions, sectors and industries. However, a main catalyst that make or break an ESG ETFs is how well the underlying holdings balance between ESG implementation and maintaining profitability.