In an ETF market worth close to $4 trillion, socially responsible ETFs, known as environmental, social, governance (ESG) funds, are still on the rise, but they all invest in different ways and produce very different returns.
In the US there are now almost 40 ESG funds, up from 22 last year, with $3.1 billion in assets, according to ETF.com, all seeking to deliver long-term positive returns while making a positive impact on society.
According to TrackInsight, socially responsible stocks tracked by ETFs around the world have gained more than $1.5 billion since this time last year, and average performance is up more than 10%.
A list of the top five performing socially responsible ETFs, all listed in the US, are below, in descending order performance-wise.
5) iShares MSCI EAFE ESG Optimised ETF (ESGD) – 17.11%
Some investors may prefer more plain vanilla ESG funds whose exposure is recognisable from the broader market. This fund focuses on Europe, South East Asia and Australia.
4) iShares MSCI Global Impact ETF (MPCT) – 18.25%
This fund is a more aggressive option as it does not stick close to the broader market. The fund tracks companies that “derive a majority of their revenue from products and services that address at least one of the world’s major social and environmental challenges as identified by the United Nations Sustainable Development Goals.”
3) iShares MSCI EM ESG Optimised ETF (ESGE) – 26.50%
Similar to ESGD above, this fund is easier to place in the broad market, and it tracks companies from emerging markets.
2) WisdomTree China ex-State-Owned Enterprises Fund (XSOE) – 37.62%
XSOE and the fund in the number one spot, CXSE, exclude state-owned enterprises from their holdings, which means that the government owns no more than 20% of the stock.
1) WisdomTree China ex-State-Owned Enterprises Fund (CXSE) – 48.52%
CXSE, the top performing fund to 20 July, showcases the appetite for investment vehicles that focus on less government involvement and more independent corporate governance. In the US, good corporate governance involves an independent board of directors, shareholder voting rights, gender equality measures, non-inflated pay for executives and similar measures.