Top S&P 500 Holdings & Key ESG ETFs

Analyzing the top holdings of leading environmental, social and governance ETFs.

Reviewed by: Todd Rosenbluth
Edited by: Todd Rosenbluth
  • Environmental, social and governance (ESG) ETF assets have climbed in 2020 off a low base, with iShares’ three largest broadly diversified funds alone gathering nearly $10 billion year to date through Aug. 7. DWS and Vanguard are also benefiting from swelling investor interest.
  • The iShares MSCI USA ESG Select ETF (SUSA), the Vanguard ESG U.S. Stock ETF (ESGV) and the iShares ESG MSCI U.S.A. ETF (ESGU) generated total returns of 22%, 21% and 19%, respectively, in the one-year period ended Aug. 7, ahead of the 16% gain for the iShares Core S&P 500 ETF (IVV), showcasing that ESG investors are not giving up performance to be more responsible.
  • ESGU holds stakes in Apple (AAPL), (AMZN) and Facebook (FB), but similar-sounding peer SUSA does not, highlighting the importance of ETF holdings analysis.


Fundamental Context

Broadly diversified ESG ETFs have gained acceptance in 2020. Many ESG equity ETFs have launched in the last five years, and this year the assets have rapidly risen off a low base. Institutional and retail investors have chosen relatively cheap, broad products from iShares, Vanguard and a few other firms. All 10 of the largest ETFs covering the three ESG pillars charge expense ratios of 0.25% or less.

iShares offers the three largest of these ETFs: the $8.3 billion ESGU, the $3.5 billion iShares ESG MSCI EM ETF (ESGE) and the $2.8 billion iShares ESG MSCI EAFE ETF (ESGD). Combined, these three funds pulled in $9.6 billion of net flows year to date through Aug. 7.



Figure 1: Broadly Diversified ESG ETFs

FundTickerExpense Ratio (%)YTD Flows ($B)Assets ($B)
iShares ESG MSCI USAESGU0.155.98.3
iShares ESG MSCI EMESGE0.252.43.5
iShares ESG MSCI EAFEESGD0.21.32.8
Xtrackers MSCI USA ESG Leaders Equity USSG0.10.62.5
iShares ESG MSCI USA LeadersSUSL0.10.52.4
iShares MSCI KLD 400 SocialDSI0.250.22.1
iShares MSCI USA ESG SelectSUSA0.250.31.6
Vanguard ESG US StockESGV0.120.81.8
Vanguard ESG International Stock VSGX0.170.51.1
iShares ESG MSCI EM LeadersLDEM0.160.60.6

Source: CFRA’s First Bridge Database; as of Aug. 7, 2020



However, iShares is not alone in benefiting from investor usage of ESG ETFs. Vanguard pulled in a combined $1.3 billion this year for ESGV and the Vanguard ESG International Stock ETF (VSGX), while the Xtrackers MSCI U.S.A. ESG Leaders Equity ETF (USSG), a DWS offering, gathered $620 million.

All these funds attempt to broadly cover the three pillars of ESG with companies that meet sufficient criteria for inclusion, rather than just excluding companies that are deemed unworthy. This is different than the approaches of the SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) and the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE), which exclude companies based on environmental or governance characteristics.

ESG ETFs Demonstrating Outperformance

Five popular core U.S. ESG ETFs outperformed S&P 500 Index-based funds during the past year, while one lagged. When ETF investors consider deviating from the widely followed core U.S. benchmark, they tend to focus on performance, particularly when the fee is limited. In the year ended Aug. 7, SUSA and ESGV rose 22%, and 21%, respectively, ahead of the 16% gain for IVV. Meanwhile, ESGU, SUSL and DSI increased 19%, 19% and 17%, respectively, in the past year. USSG climbed only 15%.

For the remainder of this report, we will focus on DSI, ESGU, SUSL and SUSA since they are offered by the same asset manager (iShares), and track similar-sounding indexes from the same provider (MSCI).

In 2020, SUSA (up 9.4%), ESGU (7.3%) and DSI (6.4%) outperformed IVV (5.0%), while SUSL (4.6%) lagged. Such albeit short-term performance makes it a little easier to answer these recurring questions:  a) does an ESG approach provide the opportunity for outperformance; and b) do investors have to give up some gains for investing in a more potentially “responsible” manner.



Figure 2: iShares ESG ETFs Performance Record vs. iShares S&P 500 Fund (%)

Source: CFRA’s First Bridge Database, as of Aug. 7, 2020



Sector Differences

The drivers of the performance are not at the sector level as might be expected. Some investors think ESG funds avoid environmentally unfriendly energy companies and favor more socially conscious information technology companies. So, when tech stocks are in favor and energy is out of favor, ESG funds would be positioned to outperform.

However, the new breed of ESG ETFs have sector neutrality at the rebalance date, and include stocks from firms with relatively high combined ESG scores compared to similar companies.

DSI and SUSA do have slight overweights to information technology (32% and 31% of assets vs. IVV’s 28% weighting), but ESGU (28%) and SUSL (27%) were in line. Meanwhile, all four funds have modestly less exposure to the tiny 2.6% position energy holds in the IVV, with DSI’s 1.6% and SUSA’s 1.7% less than SUSL’s 2.2% and ESGU’s 2.5%.



Figure 3: Sector Exposure of iShares ESG ETFs & S&P 500 Fund (%)

Source: CFRA’s First Bridge Database, as of Aug. 5, 2020



Indeed, the larger underweights for SUSA were in the communications services sector (7.5% vs. IVV’s 11%) and consumer discretionary (8.2% vs. 11%). DSI overweights communications services at 14% and underweights consumer discretionary at 9.2%. The ETF holdings are, however, different.

Disparities In Holdings

The top five stocks in the S&P 500 Index are weighted differently in ESG ETFs. In 2020, Alphabet (GOOG.L) AAPL, AMZN, FB and Microsoft (MSFT) have swelled in size. While ESGU owns all five, SUSL owns just four of these growth stocks, DSI owns three and SUSA only holds two of them.  



Figure 4: Stock Exposure of iShares ESG ETFs & S&P 500 Fund (%)

Source: CFRA’s First Bridge Database, as of Aug. 5, 2020



ESGU was slightly underweight all five stocks, with its 5.4% stake in MSFT the largest disparity relative to IVV’s 5.9%. Meanwhile, SUSA had just under 150 holdings, none of which was AAPL, AMZN or FB. However, the fund’s approximately 11% position in MSFT was nearly double the tech stock’s 5.9% weighting in IVV. In contrast, SUSL had a 5% position in MSFT, less than peers, but an overweighted 2.7% stake in GOOGL.

With just over 400 positions, DSI is the broadest of these iShares ESG offerings. Yet the fund also does not own AMZN or AAPL, but includes MSFT and lesser-known consumer discretionary and information technology stocks such as Columbia Sportswear (COLM) and Itron (ITRI). SUSL also does not own AMZN among its 291 positions, but does hold the four other top five positions in the S&P 500 Index.


Demand for ESG equity ETFs has climbed in 2020, particularly low-cost and broadly diversified U.S. equity products.

However, while the sector exposures tend to be in sync, the securities inside similar-sounding ETFs from the same providers are quite different, requiring deeper analysis than the fund’s performance record or costs alone.


All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of the analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For more information and disclosures, please refer to CFRA's Legal Notice at

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Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence’s equity and fund business in October 2016. Follow him at @ToddCFRA.