There are a number of very appealing ASX-listed exchange-traded funds (ETFs) that I think are attractive long-term buys. I want to tell you about a particular ASX ETF that could fit into virtually any investor's portfolio.
I like several funds which offer investors exposure to diversified holdings which are quality businesses such as Vanguard MSCI Index International Shares ETF (ASX: VGS), Betashares Global Quality Leaders ETF (ASX: QLTY) and VanEck MSCI International Quality ETF (ASX: QUAL).
But, some investors may not want to be invested in some of the businesses in those portfolios based on the activities they're involved in.
I think the BetaShares Global Sustainability Leaders ETF (ASX: ETHI) offers investors a lot of positives. Let's get into what's appealing.
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Diversification
This ASX ETF owns 200 businesses in the portfolio, which is a significant number and can provide investors with a very pleasing level of diversification with just one investment.
It's invested across a wide array of different businesses and sectors as technology, consumer discretionary, financials, healthcare, industrials and so on. Spreading our money through the different sectors is a useful strategy. This ASX ETF does that automatically for us and that's a good thing to do for almost every investor.
Diversification can allow investors to lower the risks without necessarily lowering the returns.
These businesses are chosen from across the global stock market, so it's invested in an array of countries including the US, Japan, the Netherlands, Canada, Germany, the UK, Switzerland, France, Denmark and more.
Ethical businesses
What sets this ASX ETF apart from nearly every other fund is how it goes about choosing the businesses for this portfolio.
Some funds choose businesses to be a holding based on their size, some are based on their industry, some on their quality and so on.
This fund is trying to choose companies that are, on average, seen as more ethical than other businesses.
Its portfolio invests in a portfolio of large global stocks identified as climate leaders in their industry and have also passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations.
By excluding certain industries that some investors wouldn't want to own, the ASX ETF may be more palatable for every investor.
The sectors it excludes are fossil fuels, gambling, tobacco, uranium and nuclear energy, weapons and militarism, companies involved the destruction of valuable environments, animal cruelty, chemicals of concern, mandatory detention of asylum seekers, alcohol producers, human rights and payday lending.
It also doesn't invest in businesses where there's evidence of human rights violations (such as child and forced labour, bribery and corruption). The ASX ETF also avoids businesses that don't have women on the board of directors.
Great businesses
You may be concerned about what businesses are left after making all of those exclusions and whether they can deliver good performance.
Within its holdings are 200 of the best businesses in its portfolio such as Broadcom, Nvidia, Apple, Home Depot, Mastercard, Visa, Toyota, ASML, Salesforce, Arista Networks and plenty more.
The holdings can change over time, but the portfolio as a whole has performed well.
Since inception in January 2017, the ETHI ETF has returned an average of 16.8% per year.
Past performance is not a guarantee of future returns of course, but the prior returns highlight the quality of the businesses involved.
