What are Australia’s ethical ETFs?

The best performing ESG fund returned over 37% year-on-year (to May).

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If you're looking to invest in companies that align with your values, ethical exchange traded funds (ETFs) are good place to start.

Australia has more than a dozen ethical-themed (ETFs) listed on the Australian Securities Exchange (ASX). Each of these follow their own set of ESG (environmental, social and governance) criteria. While some focus on sustainable practices, others prioritise social impact such as weapons, tobacco or gambling.

This guide explains how 10 popular ESG funds work, how they've performed and what their fees are. If you're looking to invest directly in stocks, check out some of the companies on our renewable energy stocks page.

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ASX Ethical ETFs

Environmentally-conscious ETFs
ASX codeFund nameFees (% p.a)1-year returnSector
IMPQeInvest Better Future Fund (Managed Fund)0.9937.9%Australian small/mid cap shares
FAIRBetaShares Australian Sustainability Leaders ETF0.4913.89%Australian shares
GRNVVanEck Vectors MSCI Australian Sustainable Equity ETF0.3519.81%Australian shares
INESIntelligent Investor Ethical Share Fund (Managed Fund)0.9726.28%Australian shares
RARIRussell Australian Responsible Investment ETF0.4529.16%Australian shares
ESGIVaneck Vectors MSCI International Sustainable Equity ETF0.5517.81%Global shares
ETHIBetaShares Global Sustainability Leaders ETF0.5924.35%Global shares
VESGVanguard Ethically Conscious International Shares Index ETF0.1821.54%Global shares
GBNDBetaShares Sustainability leaders Diversified Bond ETF - Currency Hedged0.490.07%Global fixed income
VEFIVanguard Ethically Conscious Global Aggregate Bond Index (Hedged) ETF0.260.42%Global fixed income
Source: ASX | Period ending: 31 May 2021

Note: Since this page first launched there have been at least 7 more ETFs that have listed on the ASX. The ticker codes for these are: E200, VETH, ERTH, HETH, DBBF, DGGF, DZZF
.

How do ethical ETFs work work in Australia?

Ethical ETFs are investment funds that track companies based on ESG criteria.

Crucially, there are no hard rules around which companies should be added or excluded or what ethical criteria to follow. For example, most ethical funds screen companies that directly engage in the production of fossil fuels. However, as of 2019 there are around half a dozen listed funds in Australia that ignore this factor (Update: These funds have since delisted from the ASX).

How much exposure a company should be allowed to have to fossil fuels is also up for debate. Some funds such as FAIR and IMPQ exclude Australia's major banks because they finance the oil and mining sector, but most ethical funds do not.

Below is a description of the strategies taken by each of the ESG-focused ETFs listed above along with their top stock holdings to help you decide which is right for you, in no particular order.

1. eInvest Better Future Fund (IMPQ)

An actively managed fund that invests in small Australian and New Zealand companies (less than $50 million cap) that are contributing positively to the environment and society, such as renewable energy and health foods. It filters out any companies engaged with fossil fuels, alcohol, tobacco, weapons, de-foresting, gambling and unhealthy fast food.

This fund also won our Green ETF of the Year award at this year’s Finder Green Awards so it’s a great option if climate change is a major concern for you.

Top holdings: Cash, Spark New Zealand Ltd, Charter Hall Social Infrastructure REIT, Integral Diagnostics, Iress Ltd.

Green ETF of the Year 2021: eInvest Better Future Fund

The Finder Green Awards identify the companies leading the way on sustainability in the sectors that we compare. The eInvest Better Future Fund won the ETF category through a proactive approach to identifying sustainable investments as well as offering strong financial returns in the judging period.

Compared to some funds that only screen out companies that are bad for the environment, this eInvest fund looks for companies that are generating more than 50% of their revenue from business operations that actively contribute to creating a sustainable future.

Finalists in this category were the BetaShares Global Sustainability Leaders ETF (ASX:ETHI) and the VanEck Vectors MSCI International Sustainable Equity ETF (ASX:ESGI).

Finder green awards 2021

2. BetaShares Global Sustainability Leaders ETF (ETHI).

Holds global company stocks that it identifies as “climate leaders” based on their low carbon footprint. It excludes companies with significant exposure to the fossil fuel industry and screens for those engaged with gambling, tobacco, weaponry, nuclear energy, animal cruelty, pornography, environmental destruction and human rights concerns.

Top holdings: Apple, Mastercard, Visa, United Health Group, Roche Holding

3. BetaShares Australian Sustainability Leaders ETF (FAIR)

A diverse portfolio of Australian companies involved in sustainable business activities. Exclusions include companies exposed to fossil fuels, tobacco, alcohol, junk foods, gambling, weaponry, nuclear energy, animal cruelty, environmental destruction, pornography, recent significant fines or convictions, human rights concerns and lack of gender diversity at the board level.

Top holdings: CSL, Resmed, Suncorp, Telstra, Sonic Healthcare

4. VanEck Vectors MSCI Australian Sustainable Equity ETF (GRNV)

A broad mix of large Australian companies excluding any that own fossil fuel reserves or are engaged in the mining of coal, oil and gas (although it includes mineral miners such as gold). It prioritises those with high environmental, social and corporate governance ratings in line with global research agency MSCI ESG Research.

Top holdings: CSL, Commonwealth Bank, Transurban Group, Telstra, ANZ

5. InvestSMART Ethical Share Fund Managed Fund (INES)

An actively managed fund that screens companies based on a list of problematic industries including non-renewables such as nuclear, coal and oil, as well as gambling, alcohol, tobacco, pornography, junk food, weapons and payday lending. It primarily invests in Australian companies and cash.

Top holdings: (Must request)

6. Russell Investments Australian Responsible Investment ETF (RARI)

Primarily weighted towards dividend-paying companies that show positive environmental, social and governance (ESG) characteristics. It says it also excludes companies that manufacture or distribute alcohol, tobacco, gambling, weapons and pornography. Companies with direct exposure to fossil fuel production may also be removed. The Fund invests in Australian shares and trusts.

Top holdings: Commonwealth Bank, Westpac, NAB, ANZ, CSL

7. Vaneck Vectors MSCI International Sustainable Equity ETF (ESGI)

A diversified portfolio of sustainable international companies from developed markets, excluding Australia. It excludes companies that own fossil fuel reserves or earn revenue from oil and gas activities.

Top holdings: Microsoft, Home Depot, Salesforce, ASML, Allianze

8. Vanguard Ethically Conscious International Shares Index ETF (VESG)

Holds stocks in some of the world’s biggest companies listed in major developed markets. Stocks are diversified across a range of sectors but it excludes those with significant exposure to fossil fuels, alcohol, gambling, tobacco, weaponry, nuclear power and pornography.

Top holdings: Apple, Microsoft Corp, Alphabet, Amazon, Facebook

9. BetaShares Sustainability leaders Diversified Bond ETF (GBND)

A diversified portfolio of global and Australian bonds, including a significant portion of green bonds which are used to fund environmental projects. Company bonds are screened to avoid the fossil fuel industry.

Top holdings: French Republic Government, Kingdom of Belgium, Netherlands Government, Ireland Government, New South Wales Treasury

10. Vanguard Ethically Conscious Global Aggregate Bond Index ETF (VEFI)

Bonds issued by global governments and investment grade companies. It excludes companies with significant exposure to fossil fuels, tobacco, gambling, alcohol, weapons, nuclear power and pornography.

Top holdings: United States Treasury, Japan, France, Italy, Federal National Mortgage Association

Compare online platforms to buy ETFs

Name Product Brokerage on AU ETFs Inactivity fee Markets
eToro (global stocks)
N/A
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
AUD $8 or 0.1%
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
AUD $0
No
ASX shares, US shares
Australia’s lowest-cost broker for ASX shares and ETFs.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
AUD $8
No
ASX shares
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets(T&Cs apply).$8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Saxo Capital Markets (Classic account)
AUD $5
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, ETFs
Access 3,000+ ETFs on 30+ exchanges worldwide
Low fees for Australian and global ETF investing, no inactivity fees and foreign currency accounts available.
CMC Markets Invest
AUD $11 or 0.1%
No
ASX shares, Global shares, mFunds, ETFs
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
HSBC Online Share Trading
AUD $19.95
No
ASX shares, mFunds, ETFs, Bonds
Limited time offer: Get up to $100 in brokerage rebates on your first 5 trades when you sign up to a HSBC Online Share Trading account (T&Cs apply). Make trades online with brokerage fees starting from just $19.95 with an HSBC Online Share Trading account. Plus gain access to complimentary expert research, trading ideas and tools.
Bell Direct Share Trading
AUD $15
No
ASX shares, mFunds, ETFs
Invest in Australian shares, options and managed funds from the one account with no inactivity fee.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
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Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

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