The BetaShares Global Sustainability Leaders ETF (ASX: ETHI) is a leading exchange-traded fund (ETF) that I think can provide almost everything an investor might want in a fund.
Typically, I look for an ETF that can provide strong investment returns, good diversification, and reasonable fees. I also want to invest my hard-earned money in sectors that match my ethics.
Here's why I think this Betashares ETF satisfies these criteria.
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Strong investment returns
Ultimately, investing is about generating returns. How we go about making those returns is another matter.
According to fund provider BetaShares, the ETHI ETF delivered an average annual return of 17% over the last five years and 11.8% over the prior three years to 30 April 2024.
Considering the long-term return of the ASX share market is around 10% per annum, anything above that is appealing. The BetaShares Global Sustainability Leaders ETF has done materially better than the ASX.
Currently, some of its biggest holdings are US heavyweights Nvidia, Apple, Visa and Mastercard. These stocks have performed admirably and I think the ASX ETF's portfolio is capable of producing ongoing good returns.
Diversification
I suggest investors avoid putting all of their eggs in one basket. Diversifying a portfolio across different businesses and industries can lower investment risks by reducing concentration.
The ETHI ETF is invested in 200 businesses, which is a good amount of diversification in terms of holding numbers.
I believe this fund is diversified enough when it comes to sector allocation. At the end of April 2024, the biggest weightings were in information technology (35.4%), financials (23.2%), healthcare (14.4%), consumer discretionary (13.6%), and industrials (5.5%).
IT has a relatively high weighting in the ASX ETF's portfolio, but I believe that's a good thing because many high-performing stocks have come from there in the past five years. Tech stocks typically achieve strong growth and good margins because of the digital nature of their services.
Reasonable fees
The ethical construction of this ETF requires a lot of work, which I'll discuss in a moment.
I believe the fees of this ETF are very reasonable, considering the screening that occurs and the high level of returns it has delivered.
BetaShares has an annual management fee of 0.59%, which is materially cheaper than what plenty of active fund managers might charge.
Ethical screening
The ETHI ETF starts by looking at the global share market and then makes a number of exclusions.
It excludes businesses that are involved in the activity of fossil fuels, gambling, tobacco, uranium and nuclear energy, armaments and militarism, the destruction of valuable environments, animal cruelty, chemicals of concern, mandatory detention of asylum seekers, pornography, payday lending and alcohol.
BetaShares Global Sustainability Leaders ETF excludes businesses with no women on the board of directors and companies with human rights concerns, including child labour, forced labour, sweatshops, bribery, and corruption.
The remaining 200 businesses in the ASX ETF, after that screening process, are 200 of the biggest, most ethical companies worldwide.
