Are these the best ethical ETFs in Australia? [2023]

List of top 10 ASX ethical ETFs to watch

Data as of 23 June 2023. Source: Google Finance, ASX.

 *The list of funds mentioned is ranked by the highest buy/sell ratio on Stake in 2023.

💡Related: ESG Investing: Top ESG U.S. stocks to watch→

Discover these sustainable ETFs worth watching

1. BetaShares Global Sustainability Leaders ETF ($ESGI)

Assets under management (AUM): $151.84m

ETF price (as of 23/06/2023): $29.87

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 97% / 3%

ESGI focuses on investing in global companies with strong environmental, social, and governance (ESG) practices. It aims to track the performance of the Nasdaq Future Global Sustainability Leaders Index. ESGI invests in companies that prioritise sustainability, carbon emissions reduction, renewable energy usage, labour standards, and board diversity. It differentiates itself by specifically targeting companies considered sustainability leaders, providing investors with exposure to businesses at the forefront of ESG practices.

🆚 Decide which ETF is right for you - Compare ESGI vs ETHI ETFs stock comparison→

2. BetaShares Ethical Diversified High Growth ETF ($DZZF)

Assets under management (AUM): $56.96m

ETF price (as of 23/06/2023): $25.85

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 91% / 9%

DZZF provides investors with exposure to a diversified portfolio of growth assets while adhering to ethical investment principles. It aims to track the performance of the Nasdaq Future Global Sustainable Leaders High Growth Index. DZZF stands out by offering a combination of growth-oriented investments and ethical screening, excluding companies involved in industries that do not meet specified ESG criteria. It provides a convenient way for investors to align their investment choices with their values, accessing a diversified mix of growth assets on a global scale.

🆚 Decide which ETF is right for you - Compare DZZF vs ETHI ETFs stock comparison→

3. BetaShares Australian Sustainability Leaders ETF ($FAIR)

Assets under management (AUM): $1.26b

ETF price (as of 23/06/2023): $17.96

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 90% / 10%

FAIR invests in Australian companies demonstrating strong ESG practices. It aims to track the performance of the Nasdaq Future Australian Sustainability Leaders Index. FAIR focuses on companies that excel in sustainability, carbon emissions reduction, renewable energy usage, labour standards, and board diversity. It stands out by providing exposure to Australian firms with leading sustainability credentials, allowing investors to support responsible businesses operating domestically.

4. BetaShares Global Green Energy ETF ($GRNV)

Assets under management (AUM): $130.46m

ETF price (as of 23/06/2023): $27.22

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 90% / 10%

GRNV focuses on investing in global companies involved in the green energy sector. It seeks to track the performance of the S&P Global Clean Energy Index. GRNV invests in companies engaged in renewable energy sources, energy efficiency, and other sustainable energy-related activities. This ETF differentiates itself by targeting the growing green energy sector, offering investors the opportunity to participate in the transition to cleaner and more sustainable energy sources.

5. Russell Investments Australian Responsible Investment ETF ($RARI)

Assets under management (AUM): $315.30m

ETF price (as of 23/06/2023): $24.47

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 89% / 11%

RARI invests in a portfolio of Australian companies that meet specific responsible investment criteria. It aims to track the performance of the Russell Australia ESG High Dividend Index. RARI focuses on companies that demonstrate strong ESG practices and have a higher dividend yield relative to other companies in the market. This ETF differentiates itself by combining responsible investing principles with a focus on dividend income, appealing to investors seeking both ESG considerations and potential income generation.

6. BetaShares Global Sustainability Leaders ETF - Currency Hedged ($HETH)

Assets under management (AUM): $369.53m

ETF price (as of 23/06/2023): $12.12

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 88% / 12%

HETH invests in global companies with strong ESG practices while employing a currency hedging strategy. It seeks to track the performance of the Nasdaq Future Global Sustainability Leaders Index (Hedged into Australian dollars). HETH stands out by combining ethical investing with a currency hedging approach, allowing investors to manage currency risk while supporting sustainable businesses globally.

7. Vanguard Ethically Conscious International Shares Index ETF - Currency Hedged ($VETH)

Assets under management (AUM): $380.94m

ETF price (as of 23/06/2023): $54.62

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 86% / 14%

VETH focuses on investing in international companies with stringent ESG criteria while employing a currency hedging strategy. It aims to track the performance of the FTSE Developed ex-Australia ex Non-Renewable Energy/Vice Products/Weapons Index (Hedged into Australian dollars). VETH differentiates itself by emphasising ethical investing principles and managing currency risk, providing investors with exposure to global companies committed to ESG practices.

8. Einvest Future Impact Small Caps Fund ($IMPQ)

Assets under management (AUM): $41.32m

ETF price (as of 23/06/2023): $4.90

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 85% / 15%

IMPQ focuses on investing in small-cap companies that demonstrate a strong commitment to sustainable and ethical practices. The fund seeks to provide investors with exposure to companies that have a positive environmental, social, and governance (ESG) impact. IMPQ distinguishes itself by specifically targeting small-cap stocks, which are often overlooked by traditional ethical funds. It aims to deliver long-term capital growth by investing in companies that align with certain sustainability criteria, such as renewable energy, waste management, healthcare, education, and social impact. By investing in IMPQ, investors can support the growth of small companies that are making a positive impact while potentially benefiting from their financial success.

9. Vanguard Ethically Conscious International Shares Index ETF ($VESG)

Assets under management (AUM): $689.21m

ETF price (as of 23/06/2023): $73.53

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 78% / 22%

VESG aims to provide investors with exposure to sustainable international companies that meet strict ethical standards. It seeks to track the performance of the FTSE Developed ex-Australia Index, while considering environmental, social, and governance factors. VESG invests in companies that exhibit strong ESG practices and excludes those involved in activities such as tobacco, controversial weapons, nuclear power, and more. It differentiates itself by offering a diversified portfolio of international companies with a strong focus on ethical considerations.

🆚 Decide which ETF is right for you - Compare VESG vs ETHI ETFs stock comparison→

10. BetaShares Global Sustainability Leaders ETF ($ETHI)

Assets under management (AUM): $2.54b

ETF price (as of 23/06/2023): $12.48

Stake Platform Bought / Sold (1 Jan 2023 - 23 Jun 2023): 74% / 26%

ETHI focuses on investing in global companies that demonstrate strong sustainability credentials. It aims to track the performance of the Nasdaq Future Global Sustainability Leaders Index. ETHI invests in companies that prioritise sustainability, carbon emissions reduction, renewable energy usage, labour standards, and board diversity. It stands out by specifically targeting sustainability leaders and excluding companies involved in industries such as fossil fuels, gambling, and weapons. ETHI offers investors an opportunity to align their investments with their ethical values and support companies with robust sustainability practices.

How can I invest ethically in Australia?

Ethically conscious investing involves aligning your investment choices with your values and supporting companies with sustainable practices. Here are some steps you can take to invest ethically in Australia.

1. Take the time to understand your values and priorities. Identify the ethical or sustainable principles that matter most to you. This could include avoiding industries like fossil fuels, tobacco, or weapons, promoting renewable energy, supporting gender equality, or prioritising environmental conservation. Clearly defining your values will guide your investment decisions.
2. Research ethical investment options available in Australia. Look for investment vehicles that focus on ethical or sustainable investing. These can include ethical ETFs, managed funds or individual stocks. Look for options that have a clear investment strategy aligned with your values.
3. When reviewing ethical funds, carefully assess their criteria for selecting investments. Each fund may have its own set of guidelines and exclusions. Understand how they define and evaluate companies based on environmental, social, and governance (ESG) factors. This will help you determine if their approach aligns with your values.
4. Consider incorporating ethical ETFs into your investment strategy. These funds offer diversified exposure to a portfolio of ethically screened companies. Research ETFs that focus on sustainability, socially responsible investing, or ESG factors in their investment strategies. Pay attention to their methodology and screening process to ensure they align with your values.
5. It's important to assess the ESG performance of individual companies before investing. Look for company reports or third-party ratings that assess their sustainability practices. This information can help you determine if a company aligns with your ethical criteria.

Remember, ethical investing is a personal choice, and what may be considered ethical can vary from person to person. Conduct thorough research and ensure your investment decisions align with your values and long-term financial objectives. By investing ethically, you can have a positive impact on both your financial future and the world around you.

Is ethical investing growing?

Yes, ethical investing is indeed growing.

In 2020, total assets overseen by ethical investment funds on behalf of Australian investors experienced a significant increase of 30%, reaching a value of $1.28 trillion. This demonstrates substantial growth in the adoption of ethical investing principles.

Ethical investment funds accounted for approximately 40 cents of every dollar of every managed fund in Australia. This data highlights a growing awareness and demand for investments that align with investors' ethical values and considerations. As more individuals and institutions recognise the importance of sustainable and socially responsible practices, ethical investing is expected to continue its upward trajectory.

Ethical ETFs FAQs

Are ethical funds a good investment?

Ethical funds can be a good investment choice for individuals who prioritise aligning their investments with their values. These funds provide an opportunity to support companies with sustainable practices and contribute to positive social and environmental impact. However, like any investment, it's important to conduct thorough research, assess the fund's performance, and consider your individual financial goals and risk tolerance before making investment decisions.

How to know if an ETF you’re interested in is ethical?

To determine if an ETF is ethical, research its investment strategy, including its approach to sustainability and responsible investing. Check if it integrates ESG factors and has a clear screening methodology that excludes companies and industries conflicting with ethical values.

Assess transparency, reporting, and the ETF's engagement with companies on ESG issues. Finally, consider third-party ratings or certifications and evaluate the ESG performance of the underlying holdings.

What is greenwashing?

Greenwashing refers to the practice of making misleading or unsubstantiated claims about the environmental benefits or sustainability of a product, service, or company. It involves presenting a false or exaggerated image of environmental responsibility to deceive consumers and investors.

This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice before investing.