A Deeper Dive Into ESG ETF Portfolios

August 31, 2017

The world is full of model ETF portfolios, but we’re just starting to see the environmental, socially responsible and governance (ESG) filter as a consideration on many. The biggest recent news on this front was the development by robo-platform Betterment of an ESG version of its core portfolio last month.

I thought this would be a timely opportunity to look at some popular portfolios and see how they stack up using the MSCI ESG data we’re now featuring here at ETF.com. (For a primer on what that data is, see my article from June when we launched it.)

Let’s start by looking at the portfolio my friend Matt Hougan puts together every year here on ETF.com, the world’s cheapest portfolio. 


The Hougan Portfolio

Exposure Weight Ticker Name Expense
U.S. Equity 40% ITOT iShares Core S&P Total U.S. Stock Market ETF 3 4.938 6.23 10.64 5.17
Developed Markets 30% SCHF Schwab International Equity ETF 6 6.285 6.12 10.97 6.58
Emerging Markets 5% SCHE Schwab Emerging Markets Equity ETF 13 4.389 3.16 3.25 3.45
Fixed Income 15% SCHZ Schwab US Aggregate Bond ETF 4 6.228 0.91 2.40 6.00
REITS 5% SCHH Schwab U.S. REIT ETF 7 4.036 9.83 0 4.27
Commodities 5% COMB GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF 25       6.89
        5.85 5.49 5.38 8.49  



This portfolio doesn’t have any considerations other than cost, and an essentially random asset allocation. “Cheap” is definitely the word for it—with a weighted average expense ratio of just 0.058%, it’s so close to free as to not even matter. You can stick $1 million in this portfolio and pay less for it a year than it would cost to see Hamilton.

But how does it look from an ESG lens? Put simply, pretty much middle of the road.

The U.S. equity choice here scores an overall 5, which conveniently also puts it right about the 50th percentile among U.S. total market funds. The same is true of the developed-market equity exposure—most developed markets score better than the U.S. (Europe and Japan generally have stronger governance, diversity, labor and environmental regulations), so it’s pretty middle of the road as well.


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