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4 ETFs with the best ESG ratings
If you're looking to invest in ETFs, find out which ones have ESG concerns.
ETFs (Exchange Traded Funds) are one of the most popular financial products among investors, both first-timers and experienced investors. They allow you to build a versatile, diversified portfolio with diluted risk. Discover 4 ESG ETFs you can invest in.
What are ETFs and why are they one of the best investment vehicles?
ETFs are Exchange Traded Funds (ETFs) and are similar to any other mutual funds. They typically track a particular index, sector, or commodity, but unlike mutual funds, ETFs can be bought and sold on a stock exchange just like shares.
The main advantage of investing in ETFs is that they combine a wide variety of assets into one product, allowing for better risk diversification and management, and therefore a more resilient portfolio. In fact, an ETF can be designed to track anything from the price of a commodity to a diversified portfolio. The first ETF was the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index and is still traded today. In addition, entry values are low, especially when compared to other options such as real estate or even other funds.
Despite the benefits of ETFs, these financial products are not risk-free. Factors that may affect performance include changes in the composition of the index, company takeovers or political risks. ETFs should therefore be considered as long-term investment products. Any decision should be based on the profile and objectives of each investor, even when dealing with products with a more diluted risk.
What are ESG funds?
The acronym ESG stands for ‘Environmental’, ‘Social’ and ‘Governance’. ESG funds prioritise environmental, social and human values, allowing capital to be invested in companies that focus on sustainability.
They are particularly relevant at a time when society is increasingly aware of and concerned about environmental values, and are even a key factor in consumer decision-making. This is why many ESG funds offer strong performance prospects.
Which ETFs have the best ESG ratings?
These are 4 ETFs with excellent ESG scores and positive performance over the last 12 months.
1. iShares MSCI USA SRI UCITS ETF USD (Acc)
• ISIN: IE00BYVJRR92
• YtD yield on 28 February 2023 (German market): 6.55%
This ETF is over 5 years old, is domiciled in Ireland and manages €7.5 billion in assets. It invests in US equities with a social and environmental focus, allowing for a broad investment in over 150 stocks. In terms of performance, it replicates the underlying index in its entirety, i.e. by buying all the constituents of the index. Dividends from the fund are reinvested.
This ETF also has Morninsgstar’s top ESG rating of 5 globes.
2. iShares MSCI World SRI UCITS ETF EUR (Acc)
• ISIN: IE00BYX2JD6
• YtD yield on 28 February 2023 (German market): 5.39%
This ETF is also over 5 years old and is also domiciled in Ireland. It manages €4.7 billion in assets and invests in social and environmental equities worldwide. The fund contains 372 stocks and replicates the performance of the underlying index by buying a selection of the most relevant index constituents (sampling technique). Dividends are cumulative.
Morningstar gives the fund a 4 globe ESG rating.
3. Amundi Index MSCI USA SRI PAB - UCITS ETF DR
• ISIN: LU1861136247
• YtD yield on 28 February 2023 (German market): 5.60%
This ETF is over 3 years old, is domiciled in Luxembourg and manages €3.4 billion in assets. It invests in US equities with a social and environmental focus. It is fully replicable and reinvests dividends.
In this case, Morningstar gives it a 5 globe ESG rating.
4. UBS(Lux)Fund Solutions – MSCI World Socially Responsible UCITS
• ISIN: LU0629459743
• YtD yield on 28 February 2023 (German market): 5.57%
This EFT is over 5 years old, is domiciled in Luxembourg, and manages €3.1 billion in assets. The investment focus is on social and environmental equities worldwide. It allows broad investment in around 338 stocks, is fully replicable. The fund's dividends are distributed to investors in a half-yearly basis.
As with previous examples, the Morningstar rating is high, in this case a 5 globe ESG rating.
Banco Carregosa, specialised investment management
If you want to build a diversified investment portfolio using the best ETFs, you can rely on the team of experts at Banco Carregosa. Benefit from our macroeconomic and strategic insights to protect and grow your assets.