ESG ETFs

ESG ETFs apply environmental, social, and governance criteria to screen and weight their holdings, allowing investors to align their portfolios with sustainability values while maintaining diversified market exposure. These funds exclude or underweight companies involved in controversial activities like fossil fuels, tobacco, and weapons, while favoring companies with strong ESG ratings and practices.

Notable ESG ETFs include ESGU (iShares ESG Aware MSCI USA ETF), which provides broad U.S. equity exposure with ESG screens while maintaining low tracking error to the market, SUSA (iShares MSCI USA ESG Select ETF), which applies stricter ESG criteria for more concentrated responsible investing, and ESGD (iShares ESG Aware MSCI EAFE ETF), which brings ESG screening to international developed market equities.

ESG ETFs are designed for investors who want their investments to reflect their values regarding environmental impact, social responsibility, and corporate governance. The broad ESG approach of ESGU results in a portfolio that closely resembles the overall market, with modest tilts away from the lowest-rated ESG companies. More selective funds like SUSA take stronger ESG positions that can lead to greater deviation from standard benchmarks. Performance has generally tracked close to conventional indexes, though sector exclusions can cause meaningful divergence during energy rallies or other sector-specific moves. Review each fund's specific ESG methodology to ensure it aligns with your priorities.