The Year In ESG ETFs

December 20, 2018

Small, Narrow ESG ETFs Outperform

Performancewise, however, ESG ETFs tend to be doing fairly well. Year-to-date, 17 of the 26 U.S. equity ESG ETFs on the market have outperformed the SPDR S&P 500 ETF Trust (SPY), which has dropped 3.06%. Five of the seven global total market ESG ETFs are outperforming the Vanguard Total World Stock ETF (VT).


Top 10 Best-Performing ESG ETFs Of 2018  
Ticker Fund Issuer AUM (M) Expense Ratio Spread YTD Return MSCI ESG Score
LRGE ClearBridge Large Cap Growth ESG ETF Legg Mason $6.19 0.59% 0.30% 4.54% 6.11
RODI Barclays Return on Disability ETN Barclays Bank PLC $37.89 0.45% 43.61% 4.19% N/A
NULG NuShares ESG Large-Cap Growth ETF Nuveen $59.27 0.35% 0.11% 3.36% 8.47
BOSS Global X Founder-Run Companies ETF Mirae Asset Global Investments $4.49 0.65% 0.71% 1.25% 2.69
ICAN SerenityShares Impact ETF SerenityShares $4.18 0.50% 0.28% 0.86% N/A
SUSB iShares ESG 1-5 Year USD Corporate Bond ETF BlackRock $48.64 0.12% 0.25% 0.26% 7.89
EVX VanEck Vectors Environmental Services ETF VanEck $22.78 0.55% 0.35% -0.13% 4.79
MXDU Nationwide Maximum Diversification U.S. Core Equity ETF Nationwide Fund Advisors $100.68 0.34% 0.14% -0.17% 4.55
CHGX Change Finance U.S. Large Cap Fossil Fuel Free ETF Change Finance $3.87 0.49% 0.25% -0.36% 6.63
SHE SPDR SSGA Gender Diversity Index ETF State Street Global Advisors $354.82 0.20% 0.06% -0.41% 6.47

Sources: FactSet. Data as of Dec. 17, 2018.


It's worth noting that many of these funds are small and expensive, the latter of which tends to ensure the persistence of the former.

But many of these top performers are also laser-focused on a specific issue, e.g., founder-run companies, gender diversity in the board room, environmental services. When it comes to any sort of thematic fund, the evidence shows that the more targeted the investment objective is, the better the fund's performance tends to be.

That's especially true for the ESG space, where “greenwashing” has become more and more of a problem. Currently, many ESG ETFs use selection criteria that allow for portfolio holdings that don't always align with what investors might consider "socially conscious," including companies like Exxon-Mobil (XOM), Facebook (FB) or Coca-Cola (KO). Including these stocks in an ESG fund can achieve marketlike performance at the expense of the spirit of impact investing.

For purists, funds like the SerenityShares Impact ETF (ICAN) and the Change Finance U.S. Large Cap Fossil Fuel Free ETF (CHGX), which are run by ESG true believers, indeed may be overlooked gems.

Contact Lara Crigger at [email protected]

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