TCW Transform 500 ETF to NYLI Candriam US Large Cap Equity ETF, here are some of the best sustainable ESG ETFs to explore
Sustainable investing has gained considerable momentum in recent years as more investors seek to align their portfolios with environmental, social, and governance (ESG) principles.
ESG-focused ETFs provide a way to support responsible corporate practices while also gaining broad market exposure. Here’s a detailed look at five top sustainable ETFs that are ideal for ESG-conscious investors.
1. TCW Transform 500 ETF (VOTE)
The TCW Transform 500 ETF is a unique investment vehicle designed to capture over 80% of the US equity market by focusing on the 500 largest publicly traded companies. Unlike traditional ETFs that exclude companies based on specific ESG criteria, VOTE takes an inclusive approach, using shareholder engagement to encourage better corporate governance and sustainability practices. By including major companies and influencing their behavior, investors in this ETF can help drive long-term value creation in the US economy.
The ETF tracks the Morningstar US Large Cap Select TR USD Index, a market cap-weighted index that reflects the performance of the largest US companies. This makes it a suitable core holding for investors seeking broad market exposure while advocating for positive corporate changes through active engagement. For those looking to influence corporate behavior and promote sustainability without sacrificing market coverage, VOTE offers a balanced solution.
2. Xtrackers MSCI USA Climate Action Equity ETF (USCA)
As the world increasingly moves toward sustainability, the Xtrackers MSCI USA Climate Action Equity ETF (USCA) is positioned to capture investment opportunities aligned with this shift. The ETF tracks the MSCI USA Climate Action Index, which includes large- and mid-cap U.S. companies recognized as leaders in climate action within their respective sectors.
The ETF’s rigorous selection process evaluates companies based on their emissions intensity, climate risk management, and commitments to reducing carbon footprints. This allows investors to target companies that are making significant strides in combating climate change, offering both a moral and financial incentive.
For investors who want to capitalize on the long-term growth potential of the transition to a low-carbon economy, USCA provides exposure to companies that are leading in this space.
3. iShares ESG Screened S&P 500 ETF (XVV)
The iShares ESG Screened S&P 500 ETF provides exposure to large-cap US equities while adhering to ESG criteria. This ETF tracks the S&P 500 Sustainability Screened Index, which excludes companies involved in controversial industries such as tobacco, coal, and weapons. Managed by BlackRock, a leader in sustainable investing, the fund aims to balance financial returns with a positive societal impact.
With around 445 holdings, XVV provides broad diversification across various sectors while still aligning with ESG principles. It offers quarterly distributions, adding an income component to the investment, which appeals to income-seeking investors.
At an expense ratio of just 0.08%, XVV is a cost-effective option for those who want to invest sustainably without significantly deviating from the performance of the traditional S&P 500 index.
4. Vanguard ESG US Stock ETF (ESGV)
The Vanguard ESG US Stock ETF (ESGV) is one of the most popular options for investors looking to combine broad market exposure with ESG principles. It tracks the FTSE US All Cap Choice Index, which includes large-, mid-, and small-cap U.S. companies that meet stringent ESG standards.
Companies involved in activities such as tobacco, alcohol, gambling, and fossil fuels are excluded, providing a highly ethical choice for socially conscious investors. Launched in September 2018, ESGV has gained popularity for its low expense ratio of just 0.09%, making it a cost-effective option for those looking to support ESG principles without sacrificing performance.
The fund employs a full-replication approach, closely mirroring the performance of its benchmark index while maintaining a strong ESG focus.
5. NYLI Candriam U.S. Large Cap Equity ETF (IQSU)
The NYLI Candriam U.S. Large Cap Equity ETF (IQSU) offers a passive investment approach with a focus on U.S. large- and mid-cap equities that meet specific ESG criteria. It tracks the NYLI Candriam U.S. Large Cap Equity Index, which leverages Candriam’s leading ESG research to provide a diversified portfolio across various sectors.
With an expense ratio of just 0.09%, IQSU stands out as a cost-effective, tax-sensitive investment option for those seeking to invest sustainably. The ETF has earned a Bronze rating from Morningstar, a testament to its strong management team and reliable investment process.
Its strategy focuses on high liquidity and volatility exposure, offering greater flexibility in managing the portfolio. For investors seeking a resilient core holding with a strong ESG focus, IQSU provides an excellent option.
For investors committed to sustainable investing, these five ETFs offer a variety of options across different sectors and investment approaches. Whether you prioritize corporate engagement, climate action, or broader ESG criteria, these funds provide opportunities to align your investments with your values while seeking potential financial returns. VOTE, USCA, XVV, ESGV, and IQSU stand out as top choices for ESG-conscious investors in 2024 and beyond.
