Best ESG ETFs to buy in 2022
Invezz is an independent platform with the goal of helping users achieve financial freedom. In order to fund our work, we partner with advertisers who compensate us for users that Invezz refers to their services. While our reviews and assessments of each product on the site are independent and unbiased, brands may pay to appear higher up our table rankings or place ads in specific areas of the site. The order in which products and services appear on Invezz does not represent an endorsement from us, and please be aware that there may be other platforms available to you than the products and services that appear on our website. Read more about how we make money >
Evaluating a company’s performance using environmental, social, and governance criteria along with its financials, has become a popular way to invest. ETFs offer easy access to the best ESG stocks and this guide picks some out to help you get started.
What are the top ESG ETFs to buy?
Our expert analysts have evaluated the best ESG stocks and selected their top five for the coming year which you can find listed below. Keep scrolling to learn more about each one.
|#||ETF symbol||ETF name||Where to Trade|
|1||VFTAX||Vanguard FTSE Social Index Fund|
|2||ICLN||iShares Global Clean Energy ETF|
|3||NEXTX||Shelton Green Alpha Fund|
|4||GSFP||Goldman Sachs Future Planet Equity ETF|
|5||CTRU||ARK Transparency ETF|
1. Vanguard FTSE Social Index Fund (MUTF: VFTAX)
Top of our list is the Vanguard FTSE Social Index which seeks to track the performance of an index called the FTSE4Good US Select. It invests in large and mid cap U.S. stocks which have been screened for certain social criteria. Some of the largest companies in the world are held by VFTAX and it has over $8 billion in assets.
It excludes stocks of companies operating in the adult entertainment, alcohol, tobacco, weapons, gambling, and nuclear industries. The Vanguard contains nearly 500 companies and its top ten holdings amount to over 30% of its total assets. VFTAXs top three holdings consist of tech powerhouses: Microsoft, Apple, and Amazon.
Since its inception in 2019, the fund has performed well despite a difficult economic climate during the covid pandemic which saw a drop in its value. However, its well diversified portfolio has helped it rally over 100% in the time since. VFTAX offers investors a wide range of ESG compliant companies and its strong performance bodes well for future growth.
2. iShares Global Clean Energy ETF (NASDAQ: ICLN)
The iShares fund is a renewable energy ETF which fits the criteria of ESG conscious investors. It’s the largest clean energy ETF on the market with more than $6 billion in assets. It holds over 70 stocks from all over the world and has a particular focus on companies that generate wind and solar energy.
ICLNs two largest holdings, Enphase Energy and Vestas Wind Systems, both operate in the solar and wind energy sectors and combined amount to about 16% of the fund’s total holdings. Its top ten stocks amount to nearly 50% of the ETF while including some of the biggest players in renewable energy.
It was first formed in 2008 and its price stayed flat for much of the time that followed. However, recent years have seen a surge in its value as clean energy stocks have grown in popularity. ICLN offers a diversified portfolio of stocks and is one of the most stable ways to invest in renewable energy.
3. Shelton Green Alpha Fund (MUTF: NEXTX)
Taking third place on our list is the Shelton Green Alpha Fund. As its name implies, it invests in stocks in the green economy. The fund’s objective is to achieve long-term capital appreciation by investing in companies that have above-average growth potential. It also focuses on stocks that improve human well-being while reducing environmental risks.
Since the fund’s inception in 2013 it has produced strong growth in excess of 400%. Similar to the iShares above, NEXTX has experienced an upward trend in recent years as the popularity of green energy rises. It holds some well known names including Tesla, Moderna, and the Taiwan Semiconductor Manufacturing co.
In comparison to other funds on our list, it’s on the smaller size, with assets of just over $300 million. However, it’s one of the most diversified and equally weighted ETFs meaning no single stock or sector can drastically influence its performance. For ESG conscious investors, NEXTX covers all bases and has strong historical performance which looks likely to continue.
4. Goldman Sachs Future Planet Equity ETF (NYSEARCA: GSFP)
The Goldman Sachs Future Planet was launched in the summer of 2021. It aims to invest in stocks that are innovative, attractively-valued, and aligned with durable secular growth. It focuses on companies that it believes can address environmental problems across clean energy, resource efficiency, sustainable consumption, and water sustainability.
It takes a different approach to its management and its stock selection is conducted by its fundamental equity team, composed of over 80 investment professionals. While its strategy is implemented by its quantitative investment team of over 95 professionals. GSFP invests worldwide, although has a stronger weighting towards the U.S. and Europe.
Around 40% of the fund is made up by its top ten holdings, which are fairly equally weighted. Its top two stocks include Ecolab, an American water treatment business and Enel group, an European based sustainable energy company. Investing in GSFP provides worldwide exposure to companies in growing industries while keeping within ESG criteria.
5. ARK Transparency ETF (BATS: CTRU)
The ARK Transparency ETF is the newest on our list and was formed in December 2021. It is run by well known investor Cathie Wood of Ark Investment Management. Its follows the transparency Index, which tracks the stock-price movements of the 100 most transparent companies globally.
CTRU is very small in size with just $2 million in assets, however as it has only been available for such a short period of time, that figure is likely to grow. It invests in companies worldwide, although the majority of its stocks are based in the United States. It’s the most equally weighted fund on our list and no single company amounts to more than 2% of its total size.
Some of its top ten companies include Nvidia, Enphase Energy, HP Inc, and Apple. Although the fund is so new it could make a good addition to a portfolio of ETFs with environmental, social, and governance in mind.
Where to buy the best ESG ETFs
To buy shares in an ETF you’ll first need to register with a broker. Exchange traded funds operate just like stocks do and you can buy or sell them at any time. Below you will find links to some of the top ETF brokers. Once you’ve signed up, you can get started straight away.
What is a ESG ETF?
It’s an exchange traded fund that holds shares in companies that meet the criteria for ESG investing. ESG refers to a company’s environmental, social, and governance values. ETFs holding these stocks can belong to any sector or industry and it’s common to find some of the biggest companies in the world prominent in many of these ETFs.
Are ESG ETFs a good investment?
Yes they can be and they are a good way for investors who have a preference for ESG investing to access a broad range of stocks matching their criteria. ESG investing avoids some companies that operate in higher risk industries such as gambling and tobacco, however it does restrict an investor from accessing the whole market.
The recent rise in popularity of environmental social governance investing is a positive for ETFs in this space, as more are likely to be added in the future giving investors greater choice. ESG investing includes industries such as renewable energy which is expected to substantially grow in future years. Read more: buying ETFs in 2022.
Whatever you decide to do, it’s key to keep up to date with the latest news, market analysis, and developments which you can do by clicking on any of the links below. You’ll also need to register with an online broker and if you click the blue button you’ll be directed to our expertly selected platforms to get you started right away.
Latest ESG investing news
Take-Two Interactive should be a $165 stock: Goldman Sachs
Pro: buy energy stocks as they’re holding a key trend line
FDA fast tracks Eli Lilly’s obesity drug: ‘this is the Holy Grail’
Can Elon Musk arrange financing for his $44 billion takeover of Twitter?
Conagra reports Q1 results: ‘this stock might come alive again’
Intel stock price: is this fallen angel a good buy?
Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >