One of the many positives of ASX ETFs is the ability to gain exposure to niche themes or sectors.
A trend that is becoming increasingly prevalent is the focus on ESG investing.
ESG investing is based on environmental, social, and governance considerations.
It is becoming increasingly important for investors to aim not only for financial returns but also to impact the world through their investment choices positively.
For example, this could mean focusing on climate-positive companies.
Or, it can also materialise by actively excluding companies engaged in harmful industries.
This is called negative screening – excluding companies involved in industries like fossil fuels, weapons, tobacco, gambling, etc.
Fortunately for ESG investors, there are numerous ASX ETFs that group companies aligned with these themes.
Let's look at the funds that have brought the best returns in 2025.
iShares Core MSCI World All Cap ETF (ASX: IWLD)
ESG investing can come in very different forms. For investors looking to add ESG exposure to their portfolio, it's vital to dig into each fund to understand the screening process and underlying holdings.
This is important because where ASX ETF providers draw the line on an ethical company may differ from your own.
The ethos behind the iShares Core MSCI World All Cap ETF (ASX: IWLD) is centred around investing in companies with better sustainability credentials than their peers.
The fund aims to provide investors with the performance of the MSCI World Ex Australia Custom ESG Leaders Index, before fees and expenses. The index is designed to measure the performance of global, developed market large and mid-capitalisation companies with better sustainability credentials relative to their sector peers.
A more in-depth classification of how this screening occurs can be found in the BlackRock fact sheet.
The fund has risen more than 11% this year.
It is currently comprised of more than 600 underlying holdings and focuses on companies outside Australia.
Its largest weighting by sector is to:
- Information technology (32.66%)
- Financials (14.73)
- Consumer discretionary (10.52%).
Vanguard Ethically Conscious International Shares Index ETF Fun (ASX: VESG)
This fund also employs a negative screening method to build its portfolio.
According to Vanguard, it excludes the securities of companies that have a specified level of business involvement in fossil fuels, nuclear power, alcohol, tobacco, cannabis, gambling, adult entertainment or weapons.
The index also excludes companies involved in controversial conduct related to the principles of the United Nations Global Compact.
More in-depth information about the screening process can be found on Vanguard's website.
The fund is up 11.6% so far in 2025.
It is an extremely diversified fund with more than 1,400 underlying holdings.
Its largest exposure is to:
- Technology (40.3%)
- Consumer Discretionary (15.1%)
- Financials (14.3%).
