A deep dive into ESG themed ETFs

ESG is a bit of a hot topic these days especially with more and more investors after their share of what they feel is more ethical and sustainable investing. With that in mind, it's worth exploring this theme with our data hats on.


ESG - In terms of what ESG stands for, it's Environmental, Social and Governance. According to Investopedia :

Environmental criteria may include a company’s energy use, waste, pollution, natural resource conservation, and treatment of animals. The criteria can also be used in evaluating any environmental risks a company might face and how the company is managing those risks. For example, are there issues related to its ownership of contaminated land, its disposal of hazardous waste, its management of toxic emissions, or its compliance with government environmental regulations?

Social criteria look at the company’s business relationships. Does it work with suppliers that hold the same values as it claims to hold? Does the company donate a percentage of its profits to the local community or encourage employees to perform volunteer work there? Do the company’s working conditions show high regard for its employees’ health and safety? Are other stakeholders’ interests taken into account?

With regard to governance, investors may want to know that a company uses accurate and transparent accounting methods and that stockholders are given an opportunity to vote on important issues. They may also want assurances that companies avoid conflicts of interest in their choice of board members, don't use political contributions to obtain unduly favorable treatment and, of course, don't engage in illegal practices.

Link to this is here: https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp

Whilst not in the condition set above, when we look at ESG ETFs in this article we also include those with the "ethical" tagline because whilst the focus with those is on moral and ethical grounds of investing, we feel that they should also be included if investing of this type is being considered.

Current State

Recently, research house Investment Trends was commissioned to do some work for superannuation provider Australian Ethical and were able to provide a good gauge on the state of ESG investing in Australia in 2021 so far. Across the 2,000 respondents they interviewed they had the following findings