A Deeper Dive Into ESG ETF Portfolios

August 31, 2017

If you’re focused “only” on, say, avoiding sin stocks, you can do a lot better than the iShares MSCI EAFE ESG Optimized ETF (ESGD) by choosing the PowerShares DWA Developed Markets Momentum Portfolio (PIZ). That fund makes no claim about either providing broad exposure to ex-U.S. stocks, or to keeping sin stocks out, but its momentum-chasing approach results in a portfolio with just 2.88% sin stocks.

You want nothing but do-gooders? Swap out all the equity exposure for the iShares MSCI Global Impact ETF (MPCT), which holds just 87 companies from all over the world, 75% of which pass the Sustainable Impact Solutions test.

Balancing Act

All of those choices have real consequences. Not only do most of these ETFs cost substantially more, some of them start entering the realm of being tricky to trade. MPCT, for instance, trades just a few thousand shares on an average day, making it a leap of faith to use for most people’s core allocation, and a nonstarter for big firms like Wealthfront or Betterment.

It’s great to see folks like Betterment cracking open the ESG egg. I’m quite confident that as ESG investing continues to catch on, more ETFs will have the liquidity and the track record to make their efforts even more meaningful.

In the meantime, it always pays to do your homework and determine what you’re really asking of your investing dollar. After all, it’s yours.

At the time of writing, the author held no positions in the securities mentioned. Contact Dave Nadig at [email protected].


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