Ethical ETFs in Australia to fight climate change

After we entered 2020 with large parts of the country ablaze and water levels dangerously depleted, the issue of global warming is in the public eye more than ever before.

If the catastrophic Australian bushfires have you questioning where your money is being invested, you might want to consider an ethical exchange traded fund (ETF). Or if you'd prefer to invest directly in stocks, head to our renewable energy stocks page.

Zero brokerage ETF offer

Superhero share trading

AUD 0

Standard brokerage - Australian ETFs

Zero brokerage ETF offer

Pay zero commissions when you invest in Australian ETFs and trade ASX stocks with a $5 flat fee.

• Zero brokerage for Australian ETFs
• Cheap $5 flat fee for ASX stocks
• Low $100 minimum investment
• No monthly fee for basic account

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Important: Share trading carries risk of capital loss.

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Name	Product	Brokerage on AU ETFs	Inactivity fee	Markets
Superhero share trading		AUD 0	No	ASX shares	Pay zero brokerage on all Australian ETFs. Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.	Go to site More Info	Compare	loading Fetching your data...
IG Share Trading Finder Award		AUD 8 or 0.1%	AUD 50 per quarter if you make fewer than three trades in that period	ASX shares, Global shares, Forex, CFDs, Margin trading	$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, forex and CFDs, plus get access to 24-hour customer support.	Go to site More Info	Compare	loading Fetching your data...
eToro Share Trading (US stocks) Finder Award		N/A	USD 10 per month if there’s been no login for 12 months	Forex, CFDs, US shares	Zero brokerage share trading on US 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 forex from the one account.	Go to site More Info	Compare	loading Fetching your data...
Bell Direct Share Trading Finder Award		AUD 15 or 0.1%	No	ASX shares, mFunds	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.	Go to site More Info	Compare	loading Fetching your data...
CMC Markets Stockbroking Finder Award		AUD 11 or 0.1%	No	ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, mFunds	$0 brokerage on global shares including US, UK and Japan markets. Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.	Go to site More Info	Compare	loading Fetching your data...

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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” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

ETFs are the same as regular investment funds except they can be traded on the stock market as you would buy and sell shares. These funds typically hold a collection of Australian and global company stocks and sometimes other assets such as cash, bonds or property.

There are around 16 ethical-themed ETFs listed on the Australian Securities Exchange (ASX). We selected the following funds because they prioritise sustainability as part of their criteria and removed any ethical funds that did not.

Environmental ETFs listed in Australia

How do ethical funds work?

Ethical or ESG (environmental, social and governance) investing is still very new in Australia. Of all 10 environmentally-focused ETFs traded on the ASX, just two funds – GRNV and RARI – are over three years old.

The tricky part about ESG investing is there are no hard rules around which companies should be allowed in or excluded. Most ethical funds screen companies that directly engage in the production of fossil fuels. However, as of 2019 there are around half a dozen on the ASX that ignore these factors (Note: 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 sustainability-focused ETFs listed above along with their top stock holdings to help you decide which is right for you, in no particular order.

1. 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

2. eInvest Future Impact Small Caps Fund Managed 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 eliminates those engaged with fossil fuels, alcohol, tobacco, weapons, de-foresting, gambling and unhealthy fast food.

Top holdings: Cash, Kathmandu Holdings (KMD), Integral Diagnostics (IDX), Sims Metal Management (SGM), Meridian Energy (MEZ)

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 (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 unethical 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

If you would like to show support for those impacted by the fires, you can see our guide on how to donate and help or check out a list of local businesses currently in need of financial support.