In recent years the focus of the general public shifted towards consciously choosing more sustainable options in any area of life. Of course, this translated to the business industry as well. More specifically, the desire to focus more on sustainability even reached the world of trading.
Nowadays, investors are more interested in ethical trading. This doesn’t really come as a surprise if you consider the number of sustainable options and numerous ETFs that have presented themselves on the market. ETFs from sustainable and ethical companies are already in high demand and their number is only going to continue to rise.
What’s more, the majority of ETFs are ESG-screened which means that traders looking for such options can easily access and invest in them. With that said, let’s see what are some of the best sustainable ETFs to consider in 2020.
iShares MSCI KLD 400 Social ETF (EDEN)
This iShares fund is a great example of a sustainable and ESG-screened ETF. Not only is it screened by ESG but it actually managed to score above-average ratings. It is evaluated to an index of around 400 major U.S. companies, including both Microsoft Corp. and Facebook. So, to any investor looking to make a sustainable ETF, this one really is a great option. However, it’s important to note that this ETF is quite technology stocks-biased. What this means is that about 45% of the holdings of this ETF is in information tech. That said, iShares MSCI KLD 400 Social ETF still presents a great investment option that’s not only potentially quite lucrative but ethical and sustainable as well.
First Trust ISE Global Wind Energy Index Fund (FAN)
According to the ISE Global Wind Energy Index, these ETF companies that are really trying to improve and maximize their wind energy usage. Since transitioning fully to exclusively using wind energy is both quite costly and somewhat tricky to implement even the companies that managed to implement it partially still got approved. The fund in question focuses on investing in both growth and value stocks across the wind energy sector. So, any investors looking to invest in such a fund need to look no further. Some of the top three holdings of this fund include Siemens Gamesa Renewable Energy SA, Orsted A/S and Vestas Wind Systems A/S, which are all internationally based companies.
The U.S. Vegan Climate ETF (VEGN)
Back in September of 2019, the first ever vegan ETF was presented on the market. As such, it managed to attract quite a bit of attention. Beyond Advisors IC provided the fund on the New York Stock Exchange under the symbol VEGN. What makes this fund a great sustainable ETF is the fact that its aim focuses on “addressing concerns of vegans, animal lovers and environmentalists”. Since focusing on such an important topic, this fund managed to trade over 4 million USD on its first day, which is quite an impressive sum. Of course, it’s still too early to predict how the fund will do long-term but for now it’s safe to assume that it will only continue on this path.
Vanguard ESG U.S. Stock ETF (ESGV)
This sustainable and socially conscious ETF from Vanguard has about $1.3 billion in total assets. Not surprisingly, it is tied to a larger group of holdings that amounts to nearly 1,500 components. Vanguard ESG U.S. Stock ETF also focuses on the U.S companies that managed to score the above-average ratings on ESG. But aside from larger companies, it also includes smaller names from the industry. Some of the larger names include Apple (AAPL) but as the list goes on there’s also a plethora of smaller, relatively unknown stocks. And even though these are not as well-known they spread throughout various sectors of the U.S. economy. As such, it presents a great sustainable ETF to consider.
SPDR SSGA Gender Diversity Index ETF (SHE)
As the name suggests, this socially conscious ETF is mostly focusing on companies with a strong female representation. In their 2016 promotion they featured a ponytailed girl fearlessly staring down the Wall Street bronze bull. However, keep in mind that not all channels included present the perfect balance between man and women. As an example, one of the bigger names, PayPal Holdings (PYPL), has only four women on their leadership team. Out of 11 people on the same team, that’s not really a balanced number. But it is significantly better than the majority of other companies. And considering the fact that representation is quite valued nowadays, investing in this ETF makes perfect sense.
iShares MSCI Denmark ETF (EDEN)
In the end, we have EDEN that tracks the MSCI Denmark IMI 25/50 Index. Here, it’s measuring the market exposure of Denmark’s equity market. 45 constituents make the index that covers about 99% of the market cap in Danish equity market. On average, the annual dividend yield is around 0.55% with the expense ratio of about 0-53%. The fund’s top three holdings are Novo Nordisk A/S (NOVO.B:CPH), DSV Panalpina A/S (DSV:CPH) and Orsted.
As you can see, investing in sustainable ETFs is definitely the way of the future. No matter which focus appeals to you the most, chances are you’ll easily find what you’re looking for. So, make sure you do your research and check out these great examples of sustainable ETFs in 2020.
