These are some of the top ESG funds with $700 million or more in assets.
For publicly traded companies, profits matter more than just about anything else. But many investors are interested in how firms make their money. The ESG movement — which focuses on environmental, social and governance issues — attempts to identify whether corporations are acting responsibly from that standpoint. And these days, there are a bunch of established funds that hold significant assets to serve ESG-minded investors. The following seven exchange-traded funds, or ETFs, and mutual funds all offer simple ways for you to invest with your principles in mind.
Parnassus Core Equity Fund (ticker: PRBLX)
Coming in at roughly $25 billion in assets, this Parnassus fund is the sneaky leader in socially responsible investing. After all, it doesn’t even have any fancy buzzwords in the name. However, official literature says that the fund “invests in U.S. large-cap companies with long-term competitive advantages and relevancy, quality management teams and positive performance on ESG criteria.” That makes it the perfect long-term holding for investors who want exposure to large-cap domestic stocks but with a nod toward social responsibility. Just be warned that it’s a laser-focused list of about 40 holdings, so you don’t have quite the same diversification that other funds provide.
Expense ratio: 0.82%, or $82 for $10,000 invested annually
iShares ESG Aware MSCI USA ETF (ESGU)
Looking beyond mutual funds, the largest socially responsible ETF out there is ESGU. This ETF commands more than $20 billion in assets under management at present. Created back in 2016 and run by ETF powerhouse iShares, this is definitely not a flash-in-the-pan investment that is just trying to capitalize on fashionable ESG trends. The fund holds more than 300 large- and mid-cap U.S. stocks that are selected based on “positive environmental, social and governance characteristics as identified by the index provider.” You get many of the same big names, such as Apple Inc. (AAPL), that you’d get in a typical large-cap stock fund, but this fund excludes companies with less favorable environmental records or less diversity on their corporate boards.
Expense ratio: 0.15%
Vanguard ESG U.S. Stock ETF (ESGV)
Another popular and broad-based fund that has an ESG bent is this Vanguard offering. The list of components is much larger, with about 1,500 different companies on it, including U.S. stocks of all sizes that have favorable ESG criteria. It’s worth noting, however, that it’s not much more diversified than the prior iShares fund since it’s weighted by market size. Specifically, 27% of assets are in the top 10 holdings alone thanks to trillion-dollar tech stocks representing the lion’s share of the portfolio. You do still get a fractional stake in hundreds more companies, but investors should understand it’s still a short list of big stocks driving performance with this fund.
Expense ratio: 0.09%
AB Sustainable Global Thematic Fund (ATEYX)
A smaller but still established ESG fund, this AllianceBernstein offering commands about $2 billion in assets and takes a global approach to “thematic” investing around sustainability. This is perhaps the most active and tactical offering on this list, with about 60 holdings around the world. That said, it is a very balanced approach with no single position representing more than about 3% of the portfolio at present. What’s more, those stocks are not the most obvious picks. Current leading holdings include Singapore-based logistics firm Flex Ltd. (,FLEX) and U.S. medical device company Danaher Corp. (DHR).
Expense ratio: 0.77%
iShares Global Clean Energy ETF (ICLN)
This $5 billion ETF could be attractive to investors who want to put their money behind socially responsible assets in a dedicated clean energy fund. Unlike some of the other options on this list that are exclusionary and simply kick out the worst picks with poor records, ICLN is instead driven by hand-picking companies that are making progress on a clean energy future. There are about 100 picks in the portfolio, including solar firm Enphase Energy Inc. (ENPH) and wind turbine specialist Vestas Wind Systems AS (VWSYF), among others. There isn’t as much of a social and corporate governance bent here, but if you want to go green with your investments, this is the top ETF out there.
Expense ratio: 0.4%
SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)
The flip side of the prior clean energy ETF is this SPDR index fund that simply carves out the largest fossil fuel companies and lets investors hold the rest of the large-cap universe of domestic stocks. SPYX is simple in that it takes the S&P 500 index and boots out about 15 firms, such as Exxon Mobil Corp. (XOM), and it is obviously quite popular with about $1.3 billion in assets. That said, it’s not particularly sophisticated, so those who are serious about socially responsible investing may want a more active fund to avoid unintentionally buying into firms that don’t sit well with their principles. After all, you don’t have to be a fossil fuel company to have a poor environmental record.
Expense ratio: 0.2%
1919 Socially Responsive Balanced Fund (SSIAX)
Though the smallest on this list, this $700 million fund is actually much older than some of the other picks, launching in 1992 before the modern ESG movement came into the spotlight. It also stands out because it holds a mix of stocks, bonds and cash, with 30% of assets in low-risk investment-grade bonds and about 66% in stocks that are “conducting business in a socially responsive manner.” That means those looking for a bit of income and bond exposure in one single socially responsible fund may want to have this mutual fund on their radars.
Expense ratio: 0.96%
7 best socially responsible funds:
— Parnassus Core Equity Fund (PRBLX)
— iShares ESG Aware MSCI USA ETF (ESGU) Vanguard ESG U.S. Stock ETF (ESGV)
— AB Sustainable Global Thematic Fund (ATEYX)
— iShares Global Clean Energy ETF (ICLN)
— SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)
— 1919 Socially Responsive Balanced Fund (SSIAX)
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7 Best Socially Responsible Funds originally appeared on usnews.com
Update 12/14/22: This story was previously published at an earlier date and has been updated with new information.
