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🌎 Review of the 5 Best ESG ETFs (ESG Investing Guide for US Investors and International Investors) - YouTube

Channel: fu academy

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ESG investing is booming! In the last 5 years, the money invested in ESG ETFs has gone up by almost

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9x. There are now more than 300 ESG ETFs out there, which makes picking the right

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ETF difficult. That's why in this video, we will look at ESG ETFs that invest in the US

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and globally. We will also look at more focused and specialized ones. For each ETF,

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there will be an option for US and international investors. You will get

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all the information you need for each ETF. This video is packed with goodness - so let's get it!

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What's up everyone?! This is fu academy - your channel for financial education.

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And on this channel, I share lifestyle, investing style and educational videos - just

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like this one. So if you are new here: Consider SUBSCRIBING! Just very briefly if you aren't sure

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what ESG investing is about. It's a type of sustainable investing that doesn't just focus

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on the financial return of investments but also its positive impact on the environment

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and society. ESG stands for environmental, social and governance. The environmental part focuses on

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a company's energy usage, waste, pollution and treatment of animals. The social part

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looks inside a company to see how they deal with diversity, equal employment and human rights,

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and also consider external factors like their community engagement. The governance part

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looks at factors like executive pay and diversity in the leadership and board of

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a company. And ESG investing tries to invest in companies that have a good score in these 3

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areas. What ETF providers do when they set up ESG funds is either negative or positive screening.

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Negative screening excludes companies that don't meet ESG standards like companies in the tobacco,

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gambling, weapon production or nuclear power industry. On the other side, positive screening

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actively picks stocks that have a high ESG score like renewable energy, organic food production

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or recycling companies. If you want to learn more about ESG investing, their pros and cons

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and how they performed in the past against the market, then please check out the video in the

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link. The first ETF is for US investors that want to invest in ESG friendly companies in the US. One

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option here would be Vanguard’s ESG US Stock ETF, ticker symbol ESGV. It invests in US companies

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with above-average ESG ratings. The ESGV excludes companies from the adult entertainment, alcohol,

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tobacco, weapons, fossil fuel, gambling and nuclear power industry. The ESGV was launched

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3 years ago, so you don't have a long track record. But in that time, its performance was

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pretty much in line with the S&P 500. The ESGV has a total expense ratio of 0.12%,

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which is one of the lowest you can find in the ESG space. This ETF has a fund size of 3.5 billion

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dollars which is large enough. A large fund size is important because it shows you how liquid a

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fund is - so if there are a lot of people that trade that ETF. The ESGV invests in over 1,400

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companies which is a very nice diversification. The top 10 holdings make up 27% of this fund

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which is high. And in that top 10, you won't find any surprises. You will see the Apples,

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Microsoft and Amazons of this world. The ESGV pays out dividends to ETF holders every quarter and it

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only invests in US companies. Now, what about investors outside the US that want to invest in

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a US-focused ESG ETF? That's where UCITS' come in. UCITS stands for Undertakings for the Collective

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Investment in Transferable Securities and it means that an ETF meets regulations set by the EU.

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UCITS ETFs are popular in Europe, but also South America and Asia. So for international investors,

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there is an interesting UCITS version available: The iShares MSCI USA ESG Screened UCITS ETF,

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ticker symbol SASU. "ESG Screened" is Blackrock's lowest filter level. Compared to its unfiltered

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parent ETF, the MSCI USA, it only filters out 6% of the companies which isn't much.

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It excludes companies in the weapons, tobacco and coal industry. Compared to Vanguard's ESG ETF,

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it has an even lower expense ratio of 0.07%. If you're from the US and you want to invest in a

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developed market ESG ETF, then one option would be the iShares ESG Aware MSCI EAFE ETF, ticker symbol

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ESGD. It's one of the most popular ESG ETFs out there. It excludes companies from the US and

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Canada, so Europe is quite overweight in this ETF. This is what makes it so popular, because

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European countries usually have high ESG standards because of their strict regulations. It uses

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Blackrock's second strongest ESG filter, the "ESG Aware". Compared to its unfiltered parent ETF,

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it filters out over 80% - so it's quite selective. Its performance over the last

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3 years was okay with an annual return rate of 5%. They outperformed the unfiltered parent ETF,

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but underperformed the S&P 500. This ETF has an expense ratio of 0.2% which is good. The fund size

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is around 5 billion dollars - so very liquid. The ESGD invests in almost 500 companies. The

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top 10 holdings make up around 12% which is a good balance. In the top 10, you will find well-known

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international companies. The ESGD invests in 22 developed countries like Japan, the UK and France.

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And the dividends are paid out semi-annually to the ETF holders. What I don't like about this ETF

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is it's very low tech exposure with only 9%. For international investors, there is an even

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better Blackrock ETF available that invests in the entire developed market including the US and

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Canada. That's the iShares MSCI World SRI UCITS ETF, ticker symbol SUSW. It also has a very strong

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ESG filter. Compared to its unfiltered parent ETF, it filters out over 70% of the companies.

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The downside is, again, the low tech exposure with only 16%. One difference is that it reinvests

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dividends instead of paying them out to the ETF holders. We are about halfway through. If you

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are getting value in this video, then let me know by smashing the LIKE button - thank you so much!

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If you are from the US and you are looking for some ESG exposure in emerging market countries,

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then one option is the iShares ESG Aware MSCI EM ETF, ticker symbol ESGE. It also uses Blackrock's

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second strongest ESG filter. Compared to its unfiltered parent ETF, it excludes over 70% of the

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companies that don't have a high enough ESG score. Its performance over the last 3 years was strong,

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outperforming the unfiltered parent ETF with an annual return rate of almost 7%,

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but underperforming the S&P 500. The ESGE has an expense ratio of 0.25%, which is quite low for an

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emerging markets ETF that uses a filter. The fund size is over 7 billion dollars - so quite big.

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The ESGE invests into more than 300 companies. The top 10 holdings make up almost 30% of the fund,

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which is almost too high for my taste. You can still find well-known companies in the

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top 10. The ESGE invests in 26 emerging market countries like China, Taiwan and South Korea.

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And the dividends are paid out semi-annually to the ETF holders. What I don't like about this ETF

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is that Financials are the largest sector, which you will see a lot with emerging markets ETFs. For

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international investors, there is a similar UCITS version of this ETF available: The iShares MSCI

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EM IMI ESG Screened UCITS ETF, ticker symbol SAEM. It uses Blackrock's lightest ESG filter and that's

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why it still invests in more than 1,700 companies. It also reinvests dividends instead of paying them

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out to the ETF holders. Now, if you are from the US and you want to focus on a specific

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ESG topic like the environment, then one option would be the iShares Global Clean Energy ETF,

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ticker symbol ICLN. It's one of the most popular environmental ETFs out there. Its objective is to

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invest in companies that produce energy from solar and wind. Its performance looks very volatile and

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the index is still below its 2008 level. You can expect volatility from this ETF, because clean

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energy companies are often dependent on government subsidies. If they run out, it can also take down

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the share price. This ICLN has an expense ratio of 0.46% which is already on the upper end of ETFs.

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The fund size is over 5 billion dollars - again very liquid. Because of its niche focus, the ICLN

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only invests in 33 companies - so not very diversified. This ETF is more a booster in your

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portfolio and not a core ETF. The top 10 holdings make up half of the fund which is really high,

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too high for my taste. If you are not into solar or wind energy companies, then you will probably

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not know a lot of the companies in this ETF. The ICLN invests in 14 countries which is good

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from a geographical diversification. Dividends are paid out semi-annually to the ETF holders.

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For international investors, there is an almost identical UCITS version of this ETF available:

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The iShares Global Clean Energy UCITS ETF, ticker symbol INRG. The biggest difference is that it's

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slightly more expensive. But question to you: Are you interested in certain ESG topics like the

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environment? Or do you just want that ESG label on your ETFs? Let me know in the comment section

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below! Another interesting ESG ETF is the SHE ETF from State Street that invests in companies

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that have an above average female share in their management team. It doesn't mean that there is a

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50:50 split though. If you look at the management team of their biggest holding, which is PayPal,

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you can see that they only have 3 women in their leadership team of 10.

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The SHE performance in the last 3 years was strong with an annual return rate of 13%,

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which is pretty much in line with the S&P 500. This ETF has an expense ratio of 0.2%,

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which is incredibly low for such a niche ETF. The fund size is a bit too small for my taste with

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only 200 million dollars. The SHE ETF invests in 165 companies. The top 10 holdings make up almost

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40% of the fund which is high. This ETF only invests in US companies. And the dividends are

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paid out quarterly to the ETF holders. There is an alternative available for international investors:

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The UBS Global Gender Equality UCITS ETF. The biggest difference is that the UBS ETF invests

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in 16 countries and that the top 10 holdings only make up 14% of the ETF which is way more balanced.

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It also reinvests dividends instead of paying them out to the ETF holders. So, there you have it:

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A selection of ESG ETFs for US and international investors. No matter which ESG ETF you go for,

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try to stick to the core investment principles like diversification and having a long-term focus.

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But what do you actually think? Are you already invested in one of the ESG ETFs of this video?

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Which one is your favorite? Let me know in the comment section below! I hope that this video

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could help you to get to know some ESG ETFs. If you liked what you saw and you want to support

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this channel, then please make sure you SUBSCRIBE. Thank you very much for doing that - and peace!

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