Which ethical ASX ETF is on track to deliver the best returns in 2025?

This fund is racing ahead of the ASX 200 this year.

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Key points

  • Investors are increasingly prioritising ethical, social, and governance (ESG) factors.
  • ASX ETFs offer options to align investments with personal values through positive and negative screening strategies.
  • The Betashares Climate Change Innovation ETF has delivered robust returns, up 12.68% year to date, outperforming the ASX 200 Index, which has risen approximately 5.29% in the same period.

It is becoming more and more common for investors to prioritise ethical, social, and governance (ESG) impact when investing. One way to do this is by investing in an ethically focused ASX ETF. 

There are now plenty of options on the ASX to choose from that utilise some form of screening to align with specific investor goals. 

These can be related to actively choosing companies engaged in a specific cause, or by something called negative screening.

This is when ASX ETF providers build a fund by excluding companies that don't align with specific values or are engaged in harmful activities. 

These could be companies that operate in sectors like tobacco, weapons manufacturing, gambling, etc. 

This is often called ethical investing, impact investing, or ESG investing. 

It is helpful for investors to be able to actively avoid companies that don't align with their values. 

However, one might also argue that excluding companies isn't the same as 'putting your money where your mouth is,' and actively investing in companies making positive change.

At the end of the day, alongside these causes, investors ultimately still want to build wealth. 

There is a fund that has been able to combine actively investing in climate-positive companies, while also bringing strong returns in 2025. 

Betashares Capital Ltd – Betashares Climate Change Innovation ETF (ASX: ERTH)

According to Betashares, this fund aims to track the performance of an index (before fees and expenses) that comprises a portfolio of up to 100 leading global companies that derive at least 50% of their revenues from products and services that help to address climate change and other environmental problems through the reduction or avoidance of CO2 emissions. 

This covers clean energy providers, along with leading companies tackling green transport, waste management, sustainable product development, and improved energy efficiency and storage.

By supporting companies that are leading the fight to create a more sustainable planet, investors in ERTH can be confident that their investment dollars are having a positive impact.

This is one of the few ASX ETFs I could find that is actively investing in climate-positive companies rather than just using negative screening. 

It does also use negative screening, to exclude companies with direct involvement in the fossil fuels industry (coal, oil, and natural gas). 

Alongside its innovative structure, the fund has also brought strong returns in 2025. 

Since January, it is up 12.68%. 

For comparison, the S&P/ASX 200 Index (ASX: XJO), Australia's benchmark index, is up approximately 5.29% year to date.

Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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