You’d be wise to remember these two acronyms that have managed to thrust ethical investing into mainstream finance: ESG, and ETF.
ESG ETFs (aka environmental, social and governance exchange-traded funds) focus on investing criteria for social good, and have quickly captured attention as investors are increasingly aware of the impact of issues like climate change on corporate profits.
Being a relatively low-cost, low-risk avenue into accessing a diversified portion of the sharemarket, ESG ETFs have gained popularity through providers like Betashares and Vanguard.
An ETF can be bought or sold on the Australian stock exchange, and offers what Betashares describe as “simple to use, transparent, low cost and flexible investment options for investors”.
“An ETF is an open-ended investment fund,” says Betashares, “similar to a traditional managed fund, that is traded on the ASX – just like any share.”
ETFs often have a theme—like robotics or cloud computing—and ESG is quickly becoming a commonality.
So what are some of ESG ETFs on offer on the ASX?
According to the AFR, the “passive and active managed funds that specialise in sustainable investing and are open to retail investors” include an expansive list of ETFs that can be traded on the ASX. Here are our top 3 picks:
BetaShares Sustainability Leaders Diversified Bond ETF (GBND)
The AFR describes Betashares as “among the more innovative” in the realm of sustainable ETFs, with a strict eligibility criteria and low-cost exposure to ethical investing.
Betashares offers both the Australian Sustainability Leaders ETF and the Global Sustainability Leaders ETF, which actively screen companies on their sustainability performance.
Australian Ethical Investment (AEF)
Similar to Betashares, this small-cap funds management company is what the AFR touts as “among the most committed ethical investors in Australia”, excluding “harmful sectors” and choosing to invest in renewable energy, technology, sustainable product development and universal healthcare.
The company is able to push for change through its Advocacy fund, which allows it to buy shares in companies that don’t pass their ethical charter, offering funds over several asset classes: think “Australian and international equities, small-cap equities and fixed income”.
The AFR notes this ASX-listed company has a total return of 187 per cent over one year, and an annual return of 68 per cent over five years; a sustainable investing boom that has ultimately rewarded investors.
Russell Investments Australian Responsible Investment ETF (RARI)
RARI is classified by the AFR as being inclined towards companies that perform strongly in ESG. It invests in Australian shares and trusts, expected to appeal to income investors through their focus on companies that pay higher dividends.
The AFR’s report identifies that companies included in RARI had “zero carbon reserves relative to S&P/ASX 200 companies” and roughly half the carbon footprint of companies in that index.
Sustainable ETFs sparked your interest? You can trade any of these ASX-listed funds via the OpenTrader platform, which offers direct, low-latency connectivity to the share market, as well as being CHESS Sponsored through OpenMarkets, giving you protection under the National Guarantee Fund.
Begin your sustainable journey here and start trading with a free two-month pro-platform trial with OpenTrader.