2 ETFs for ethical investors

Ethical concerns are an increasingly important investment consideration for Australian investors.
Ethical investing generally involves trying to invest in companies that align with the investor's ethical ideology.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Ethical concerns are an increasingly important investment consideration for Australian investors. Ethical investing generally involves trying to invest in companies that align with the investor's ethical ideology. An example is avoiding so called 'sin stocks', that is, companies involved in making tobacco, alcohol, gambling and firearms.  

Positive and negative screens can be used to assess shares from an ethical viewpoint. Negative screens screen out shares based on ethical considerations while positive screens preference shares based on ethical considerations. 

The responsible investment market grew by 13% in 2018 to $980 billion, representing 44% of a total $2.34 trillion in assets under management in Australia. Here we take a look at 2 ETFs designed with ethical investors in mind. 

Ethical ETFs

The Betashares Australian Sustainability Leaders ETF (ASX: FAIR) provides exposure to a portfolio of companies screened to preference businesses engaged in sustainable business practices and avoid those engaged in activities deemed inconsistent with responsible investment considerations. The ETF returned 22.15% in the year to 31 October. Management costs are 0.49% per annum and distributions are made twice annually.

Top holdings include CSL Limited (ASX: CSL) (4.6%), Resmed Inc (ASX: RMD) (4.3%), Suncorp Group Ltd (ASX: SUN) (3.9%), Sonic Healthcare Ltd (ASX: SHL) (3.8%), Brambles Limited (ASX: BXB) (3.8%), Insurance Australia Group Ltd (ASX: IAG) (3.8%), Cochlear Limited (ASX: COH) (3.7%) and Telstra Corporation Ltd (ASX: TLS) (3.7%).

The Betashares Global Sustainability Leaders ETF (ASX: ETHI) provides exposure to 100 large global shares (ex Australia) which are climate change leaders and not materially engaged in activities inconsistent with responsible investment considerations. Exclusion screens are applied to remove companies with exposure to fossil fuel, gambling, armaments, uranium/nuclear energy, junk food, animal cruelty, pornography, human rights and supply chain concerns.

The fund returned 31.15% in the year to 29 November. Management costs are 0.59% and distributions are made twice yearly. Holdings are distributed across the United States (75.2%), Switzerland (5.0%), Japan (4.4%), Hong Kong (3.1%), Netherlands (2.3%), Denmark (2.1%), Sweden (1.9%), Spain (1.5%), Finland (1.0%) and elsewhere (3.4%).

Top holdings include Apple (4.8%), MasterCard (4.3%), Visa (4.1%), UnitedHealth Group (4.0%), Home Depot (3.9%), Roche Holding (3.9%), Adobe Systems (2.4%), PayPal Holdings (2.0%), Nvidia Corp (2.0%), and Netflix (2.0%).

Foolish takeaway

Ethical ETFs are a welcome addition to the ETF universe, providing investors with a 'one stop shop' for responsible investing. 

Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on How to invest

A couple sits in their lounge room with a large piggy bank on the coffee table. They smile while the male partner feeds some money into the slot while the female partner looks on with an iPad style device in her hands as though they are budgeting.
How to invest

Where to invest $8,000 in April 2024

Here's what sort of returns could be on offer from these ASX shares according to analysts.

Read more »

An ASX dividend investor lies back in a deck chair with his hands behind his head on a quiet and beautiful beach with blue sky and water in the background.
How to invest

Shares vs. property: How to generate $500 passive income per month

We run the numbers.

Read more »

A woman holds a lightbulb in one hand and a wad of cash in the other
How to invest

ASX 200 shares vs term deposits: What $5,000 invested a year ago is worth now

Which has been the superior option for investors?

Read more »

Kid on a skateboard with cardboard wings soars along the road.
How to invest

Shares vs. property: Why cheaper homes and ASX small-cap shares are rising fastest in 2024

We look into the changing trends in shares vs. property.

Read more »

Smiling young parents with their daughter dream of success.
How to invest

2 ASX shares that could help set you up for life

Analysts are saying good things about these buy-rated shares.

Read more »

a man wearing casual clothes fans a selection of Australian banknotes over his chin with an excited, widemouthed expression on his face.
How to invest

$20,000 invested in these ASX 200 shares 10 years ago is worth how much?

Would you be laughing all the way to the bank today or not?

Read more »

Busy freeway and tollway at dusk
How to invest

If inflation rebounds I'll be buying this leading ASX 200 share

Inflation doesn’t impact all ASX 200 shares equally.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
How to invest

Forget term deposits and listen to Warren Buffett's advice with ASX shares

Are you missing out if you buy term deposits?

Read more »