ESG ETFs: Doing Good & Beating The Market

Video Length: 00:11:20

2019 was an excellent year for ESG ETFs that invest in companies with strong environmental, social and governance practices. They attracted record inflows and also delivered solid performance.

Many investors think that ethical investing means scarifying some returns, but last year, some of these ETFs were able to beat the broader market and most provided comparable returns.

Investors now have access to a number of broad equity and bond ESG ETFs that can be used as portfolio building tools.

These ETFs typically exclude weapon manufacturers, casino operators, alcohol and tobacco companies, but some of these funds still include energy companies that score high on social and governance metrics.

The iShares MSCI KLD 400 Social ETF (DSI - Free Report) holds 400 US companies with outstanding ESG ratings and excludes companies whose products have negative social or environmental impacts. Top holdings in the fund include Microsoft (MSFT - Free Report) and Facebook (FB - Free Report). It gained 29% over the past year.

The SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX - Free Report) eliminates companies that own fossil fuel reserves, from the S&P 500 index. Apple (AAPL - Free Report) and Microsoft are its top holdings. SPYX was up 30% in the past 12 months.

The Nuveen ESG Large-Cap Growth ETF (NULG - Free Report) holds large-cap growth stocks that satisfy certain ESG criteria. Microsoft and Google (GOOGL - Free Report) are its top holdings. NULG retuned 38% over the past year.

The Invesco WilderHill Clean Energy ETF (PBW - Free Report) invests in companies that advance cleaner energy and conservation. Enphase Energy (ENPH - Free Report), Solar Edge (SEDG - Free Report) and Tesla (TSLA - Free Report) are among its holdings

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