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What are Australia’s ethical ETFs?

The best-performing ESG fund returned over 17.17% year-on-year (to 31 January 2023).

For those looking to align their values with their money, an ethical exchange-traded fund (ETF) is a good place to start.

Australia has more than a dozen ethical-themed ETFs listed on the Australian Securities Exchange (ASX). Each follows its own set of environmental, social and governance (ESG) criteria, but it is important to note that there is no universal definition for ESG investing. This means that different funds focus on different metrics. 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 guide on renewable energy stocks.

ASX ethical ETFs

Environmentally conscious ETFs
ASX codeFund nameFees (% p.a)1-year returnSector
IMPQeInvest Better Future Fund (managed fund)0.99-8.56%Australian small/mid-cap shares
FAIRBetaShares Australian Sustainability Leaders ETF0.49-0.18%Australian shares
GRNVVanEck Vectors MSCI Australian Sustainable Equity ETF0.355.08%Australian shares
INESIntelligent Investor Ethical Share Fund (managed fund)0.97-0.86%Australian shares
RARIRussell Australian Responsible Investment ETF0.459.42%Australian shares
ESGIVanEck Vectors MSCI International Sustainable Equity ETF0.55-3.20%Global shares
ETHIBetaShares Global Sustainability Leaders ETF0.59-9.97%Global shares
VESGVanguard Ethically Conscious International Shares Index ETF0.18-11.15%Global shares
GBNDBetaShares Sustainability leaders Diversified Bond ETF – Currency Hedged0.49-11.59%Global fixed income
VEFIVanguard Ethically Conscious Global Aggregate Bond Index ETF (hedged)0.26-10.45%Global fixed income
E200SPDR S&P/ASX 200 ESG Fund ETF (hedged)0.1317.17%Global fixed income
VETHVanguard Ethically Conscious Australian Shares ETF0.178.87%Australian shares
ERTHBetaShares Climate Change Innovation ETF0.65-12.80%Global shares
HETHBetaShares Global Sustainability Leaders ETF – Currency Hedged0.62-10.34%Global shares
DBBFBetaShares Ethical Diversified Balanced ETF0.39-7.98%Mixed asset
DGGFBetaShares Ethical Diversified Growth ETF0.39-7.77%Mixed asset
DZZFBetaShares Ethical High Growth ETF0.39-6.60%Mixed asset
AEAEAustralian Ethical High Conviction Fund (managed fund)0.80-0.00%Australian shares
Source: ASX,CBOE | Period ending: 31 January 2023

How do ethical ETFs 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.

In some instances, ESG is based on exclusion. In other cases, it is about working with businesses to reduce their impact.

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 been 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.

In no particular order, 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.

How to choose a sustainable ETF

Pat Garrett, co-CEO of Six Park online investment management service

When you're looking at sustainable ETFs, you need to be clear on what sustainability criteria or frameworks have been applied. What are the filters being used to construct the ETFs?Photo of Pat Garrett

There are both negative filters, which screen out investments that don't meet sustainability criteria (for example, tobacco companies or fossil fuel producers) and also positive filters which include companies that are, for example, committed to having more women involved at the board level.

Depending on how the ETF is being managed, these filters can become quite subjective and actively managed, which is something to bear in mind when making any decisions. Consider diversification too.

1. BetaShares Global Sustainability Leaders ETF (ETHI)

This 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: Visa, NVIDIA, Home Depot, Apple, Mastercard

Green ETF of the Year 2022: BetaShares Global Sustainability ETF

The Finder Green Awards identify the companies leading the way on sustainability in the sectors that we compare. The BetaShares Global Sustainability ETF (ETHI) 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 BetaShares ETF looks for companies that are "climate leaders" who have passed screens. It excludes businesses with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investing.

The finalist in this category was eInvest Better Future Fund.

Finder green awards 2021

2. eInvest Better Future Fund (IMPQ)

It's 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, deforesting, gambling and unhealthy fast food.

This fund also won our Green ETF of the Year award in 2021's Finder Green Awards so it's a great option if climate change is a major concern for you.

Top holdings: Meridian Energy, Spark New Zealand Ltd, Chorus, NIB Holdings, KMD Brands

3. BetaShares Australian Sustainability Leaders ETF (FAIR)

This is a diverse portfolio of Australian companies involved in sustainable business activities. Exclusions are 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: Telstra, Brambles, CSL, Goodmans, Suncorp

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

It's 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 ESG ratings in line with global research agency MSCI ESG Research.

Top holdings: Telstra, CSL, Fortescue Metals, Westpac, Transurban

5. InvestSMART Ethical Share Fund Managed Fund (INES)

This actively managed fund 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 from the provider)

6. Russell Investments Australian Responsible Investment ETF (RARI)

Primarily weighted towards dividend-paying companies that show positive 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, CSL, NAB, Westpac, ANZ

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

It's 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: Novo Nordisk, Adobe, Home Depot, Amgen, AIA Group

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

This fund 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, Amazon, Alphabet, NVIDIA

9. BetaShares Sustainability Leaders Diversified Bond ETF (GBND)

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

Top holdings: French Republic Government, European Union, Treasury Corp of Victoria, Netherlands Government Bonds, Western Australia Treasury Corp

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, Germany, Canada

Compare online platforms to buy ethical ETFs

Icon to represent comparison of share trading
Did you know?
You could save $1,046 a year on average in brokerage fees by switching to a more suitable online broker, according to Finder research. You might even save money by having more than one platform, especially if you are investing both in Australia and internationally.
1 - 5 of 5
Name Product Brokerage on AU ETFs Inactivity fee Asset class
IG Share Trading
Finder Award
IG Share Trading
AUD $8
ASX shares, Global shares, US shares, UK shares, ETFs
$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 and international shares, plus get access to 24-hour customer support.
CMC Invest
Finder Award
CMC Invest
ASX shares, Global shares, Options trading, US shares, mFunds, ETFs
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 35,000 products, including shares, crypto, ETFs and managed funds, with access to 15 major global and Australian stock exchanges. Plus, buy Aussie shares for $0 brokerage up to $1,000. (Limited to one buy order per stock per trading day).
Moomoo Share Trading
ASX shares, Global shares, US shares, ETFs
Finder exclusive: Get an additional 30 days on top of the regular brokerage-free period for new accounts (see link for details). T&Cs apply. Please note that additional pass-through fees and foreign exchange conversion spreads may also apply.
Trade shares on the ASX, the US markets and buy ETFs with Moomoo. Plus join a community over 20 million investors.
Tiger Brokers
Tiger Brokers
ASX shares, Global shares, US shares, ETFs
Finder exclusive: Get 10 brokerage-free trades for the US or ASX market for the first 180 days and US$50 fractional shares when you deposit at least US$500. Plus, all new customers get 1 free trade per month for the first 12 months (T&Cs apply).
Get one brokerage-free trade per month for the first 12 months for US or ASX markets. T&Cs apply.
ASX shares, Options trading, US shares, ETFs
Earn US$100 in cash vouchers when you fund your new account and maintain a minimum balance of US$2,000 by Dec 29 until March 31, 2024. Plus, earn up to 5.3% p.a. interest on your US cash account (T&Cs apply).
Trade ASX and US stocks and US options, plus gain access to inbuilt news platforms and educational resources. You can also start trading for less with fractional shares.

Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

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