Many Aussie investors now target financial success alongside positively impacting the world through their investment choices.

This can look different for many investors. 

For some, this can focus on targeting companies aiming for certain environmental targets. 

It can also mean eliminating companies engaged in certain practices like weapons or tobacco manufacturing, gambling, etc. 

This is called negative screening.

These broader investment styles are also known as socially responsible, sustainable, green, or impact investing. 

Essentially, it will look a little different for each investor as they balance financial and ESG goals. 

If you are looking to add an ESG-themed fund to your portfolio, here are three of the most popular for investors in 2026. 

Betashares Australian Sustainability Leaders ETF (ASX: FAIR)

According to Betashares, this fund aims to track the performance of an index (before fees and expenses) that includes Australian companies that have passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations.

The Fund's methodology also preferences companies classified as 'Sustainability Leaders' based on their involvement in business activities aligned to the United Nations Sustainable Development Goals.

The fund does not invest in any of the big four banks, or large Australian mining companies.

It has a management fee per annum (p.a.) of 0.49%. 

iShares Core MSCI World All Cap ETF (ASX: IWLD)

This ASX ETF provides investors with an opportunity to invest in non-Australian companies. 

The Fund aims to provide investors with the performance of the MSCI World Ex Australia Custom ESG Leaders Index. 

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.

More info about the index can be found here.

However, for example, it negatively screens companies engaged in industries like: 

• Adult entertainment
• Alcohol
• Weapons
• Gambling
• Oil & gas drilling
• Tobacco and more

At the time of writing, it is made up of more than 600 holdings, and comes with a management fee of 0.09% p.a. 

Betashares Climate Change Innovation ETF (ASX: ERTH)

This ASX ETF is worth listing because, rather than using negative screening and eliminating negative companies, it actually targets companies actively engaged in climate solutions. 

That might sound similar on the surface, but they're actually very different strategies. 

Negative screening only removes "bad" companies – it doesn't actively pick "good" ones.

Suppose an ESG ETF excludes fossil fuels, tobacco, and weapons.

What's left could still be a bunch of companies that are neutral or even minimally impactful – like banks, supermarkets, or software firms that aren't actively solving environmental or social problems.

You might end up with a portfolio of companies that simply aren't doing harm, but also aren't contributing anything positive, like renewable energy, clean tech, or social-impact ventures.

However, the ERTH ETF provides 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.

It comes with a management fee p.a. of 0.65%. 

The post 3 of the most popular ethical/ESG ASX ETFs in 2026 appeared first on The Motley Fool Australia.

Investors in the Betashares Global Gold Miners Currency Hedged ETF (ASX: MNRS) will be among those paid today.

The gold miners ETF was one of the best performers of 2025, delivering a whopping total return of 149%.

MNRS tracks the performance of the Nasdaq Global ex-Australia Gold Miners Hedged AUD Index.

The 65% rally in the gold price last year, building on the 24% lift in 2024, was a big tailwind behind MNRS last year.

Investors in Betashares Global Defence ETF (ASX: ARMR) will also be paid today.

ARMR is benefitting from a big increase in global defence spending amid volatile geopolitics these days.

It tracks the VettaFi Global Defence Leaders Index and gave investors a total return of 48% last year.

Dividends to be paid today

Here are the dividends that investors will receive, rounded to two decimal places, today.

The Betashares Australia 200 ETF (ASX: A200) will pay $1.15 per unit with 60% franking.

Betashares Australian Quality ETF (ASX: AQLT) will pay 47 cents per unit with 93% franking.

The Betashares Global Defence ETF (ASX: ARMR) will pay 32 cents per unit.

Betashares Global Gold Miners Currency Hedged ETF (ASX: MNRS) will pay 3 cents per unit.

The Betashares Asia Technology Tigers ETF (ASX: ASIA) will pay 67 cents per unit.

Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) will pay 6 cents per unit with 106% franking.

Betashares Diversified All Growth ETF (ASX: DHHF) will pay 30 cents per unit with 22% franking.

The Betashares Global Sustainability Leaders ETF (ASX: ETHI) will pay 4 cents per unit.

Betashares Australian Sustainability Leaders ETF (ASX: FAIR) will pay 29 cents per unit with 65% franking.

But wait, there's more…

The Betashares Geared Australian Equity Fund – Hedge Fund (ASX: GEAR) will pay 45 cents per unit with 225% franking.

Betashares Australian Dividend Harvester Active ETF (ASX: HVST) will pay 6 cents per unit with 74% franking.

The Betashares S&P Australian Shares High Yield ETF (ASX: HYLD) will pay 12 cents per unit with 66% franking.

Betashares Australian Financials Sector ETF (ASX: QFN) will pay 28 cents per unit with 89% franking.

Betashares Global Quality Leaders ETF (ASX: QLTY) will pay 9 cents per unit.

The Betashares Australian Resources Sector ETF (ASX: QRE) will pay 11 cents per unit with 101% franking.

Betashares Global Uranium ETF (ASX: URNM) will pay 3 cents per unit.

The Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX) will pay 13 cents per unit with 31% franking.

Betashares Global Banks Currency Hedged (ASX: BNKS) will pay 11 cents per unit.

Betashares Global Energy Companies Currency Hedged ETF (ASX: FUEL) will pay 9 cents per unit.

The post Own MNRS or ARMR ETFs? Here's why it's a big day for you appeared first on The Motley Fool Australia.

Investors who own these Betashares ETFs below will receive their dividends on 19 January.

The ex-dividend date is today, and the record date is Monday.

How much in dividends will you receive?

Here are the dividends that investors will receive, rounded to the nearest cent, on 19 January.

The Betashares Australia 200 ETF (ASX: A200) will pay $1.15 per unit with 60% franking.

Betashares Australian Quality ETF (ASX: AQLT) will pay 47 cents per unit with 93% franking.

The Betashares Global Defence ETF (ASX: ARMR) will pay 32 cents per unit.

The Betashares Global Gold Miners Currency Hedged ETF (ASX: MNRS) will pay 3 cents per unit.

The Betashares Asia Technology Tigers ETF (ASX: ASIA) will pay 67 cents per unit.

Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) will pay 6 cents per unit with 106% franking.

Betashares Diversified All Growth ETF (ASX: DHHF) will pay 30 cents per unit with 22% franking.

The Betashares Global Sustainability Leaders ETF (ASX: ETHI) will pay 4 cents per unit.

The Betashares Australian Sustainability Leaders ETF (ASX: FAIR) will pay 29 cents per unit with 65% franking.

More ASX ETFs paying dividends soon

The Betashares Geared Australian Equity Fund – Hedge Fund (ASX: GEAR) will pay 45 cents per unit with 225% franking.

The Betashares Australian Dividend Harvester Active ETF (ASX: HVST) will pay 6 cents per unit with 74% franking.

The Betashares S&P Australian Shares High Yield ETF (ASX: HYLD) will pay 12 cents per unit with 66% franking.

The Betashares Australian Financials Sector ETF (ASX: QFN) will pay 28 cents per unit with 89% franking.

Betashares Global Quality Leaders ETF (ASX: QLTY) will pay 9 cents per unit.

The Betashares Australian Resources Sector ETF (ASX: QRE) will pay 11 cents per unit with 101% franking.

Betashares Global Uranium ETF (ASX: URNM) will pay 3 cents per unit.

The Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX) will pay 13 cents per unit with 31% franking.

Betashares Global Banks Currency Hedged (ASX: BNKS) will pay 11 cents per unit.

Betashares Global Energy Companies Currency Hedged ETF (ASX: FUEL) will pay 9 cents per unit.

Want to reinvest your ASX ETF dividends?

A distribution reinvestment plan (DRP) is available for eligible Betashares ETFs.

Betashares' registrar, MUFG Corporate Markets, must receive your DRP election by 5pm AEST on 6 January.

The post Own Betashares ASX ETFs? Here's your next dividend appeared first on The Motley Fool Australia.

You might have exposure to some of the major blue-chip companies listed on the ASX. This could be a variety of the big banks, mining and materials stocks etc. 

You also know that a balanced portfolio includes stocks outside Australia. Based on this, you might have bought a fund that tracks the S&P 500 Index (SP: .INX). 

This gives you exposure to sectors less common on the ASX like technology and healthcare, as well as big global companies like Nvidia (NASDAQ: NVDA) and Apple (NASDAQ: AAPL). 

At this point, your portfolio is looking solid. 

Now you may be looking to add a small but concentrated investment in one specific sector. 

This is called thematic investing. Here are some growing themes you may be interested in targeting. 

Commodities 

Commodities are simply raw materials.

They can be precious metals like gold and silver or foodstuffs like corn and wheat and even energy resources like crude oil and natural gas.

This year, physical commodities like gold have far outpaced the returns of the ASX 200. The price of physical gold has risen more than 40%. 

This can be a strong investment for diversification because commodity prices can often move differently from share prices.

Gold has a long history of preserving its value, so investors flock to it when other financial markets get rocky. 

If you are interested in adding commodities like gold to your portfolio, some ASX ETFs to consider include: 

• Global X Physical Gold (ASX: GOLD)
• BetaShares Gold Bullion ETF – Currency Hedged (ASX: QAU)
• VanEck Gold Miners ETF (ASX: GDX)

Artificial Intelligence 

A growing theme that may interest investors is artificial intelligence.

According to Grand View Research, the global AI market is expected to grow at a compound annual growth rate (CAGR) of 38.1% from 2022 to 2030. 

AI stocks can be companies involved in chip making, software, or firms that utilise artificial intelligence in their applications.

Importantly, the ASX does not have as many AI focussed stocks as other markets. This can make AI ASX ETFs beneficial, as investors can gain exposure to innovative AI companies in the US, Asia and Europe. 

Some to consider for AI exposure include: 

• Global X AI Infrastructure ETF (ASX: AINF) 
• Global X Robo Global Robotics And Automation ETF (ASX: ROBO)
• Global X Artificial Intelligence ETF (ASX: GXAI)

ESG ASX ETFs

ESG stands for environmental, social, and governance. It is a growing theme amongst investors to target not only financial growth, but simultaneously have a positive global impact through their investment choices.

As the name suggests, this may involve targeting companies committed to contributing to climate targets, supporting human rights etc. It can also involve actively excluding companies that contribute to violence, war, alcohol/tobacco manufacturing or negatively impacting the environment. 

If this sounds like a strategy you would like to include in your investment portfolio, some ASX ETFs to consider include: 

• Betashares Australian Sustainability Leaders ETF (ASX: FAIR)
• Vanguard Ethically Conscious International Shares Index Etf (ASX: VESG)
• BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
• Betashares Energy Transition Metals Etf (ASX: XMET)

The post Thematic ASX ETF investing ideas appeared first on The Motley Fool Australia.

How about the new Betashares Global Defence ETF (ASX: ARMR), which only began trading in October last year?

If you're invested in any Betashares exchange-traded funds (ETFs), today you'll be rewarded with your next lot of dividends.

Here is how much you'll receive in your bank account by the close of business on Wednesday.

Dividends for A200, NDQ and ARMR ETFs

The A200 ETF tracks the benchmark S&P/ASX 200 Index (ASX: XJO) before fees.

It provides exposure to Australia's top listed companies, including Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), and CSL Ltd (ASX: CSL).

A200 will pay $1.07576468 per unit with 56.21% franking.

ASX NDQ tracks the NASDAQ-100 Index (NASDAQ: NDX) before fees.

This ETF provides exposure to global household names like Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META), Nvidia (NASDAQ: NVDA), and Tesla (NASDAQ: TSLA).

The ASX NDQ will pay 49.021982 cents per unit.

The ARMR ETF seeks to track the VettaFi Global Defence Leaders Index before fees.

ARMR provides exposure to up to 60 companies that derive more than 50% of their revenue from defence equipment or services.

The ETF's top holdings are Rheinmetall AG (ETR: RHM), Palantir Technologies (NASDAQ: PLTR), and BAE Systems PLC (FRA: BSP).

ARMR ETF will pay a maiden dividend of 53.546615 cents per unit.

What about other Betashares ASX ETFs?

Here is a summary of the dividends that people invested in this selection of Betashares ETFs will receive today.

Betashares Australian Quality ETF (ASX: AQLT) will pay 78.670012 cents per unit with 45.7% franking.

The Betashares Asia Technology Tigers ETF (ASX: ASIA) will pay 2.7997434 cents per unit.

Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) will pay 62.133156 cents per unit with 9.65% franking.

Betashares Diversified All Growth ETF (ASX: DHHF) will pay 27.862004 cents per unit with 21.31% franking.

The Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ) will pay 28.781362 cents per unit.

Betashares Climate Change Innovation ETF (ASX: ERTH) will pay 4.524139 cents per unit.

The Betashares Global Sustainability Leaders ETF (ASX: ETHI) will pay 30.660703 cents per unit.

The Betashares Australian Sustainability Leaders ETF (ASX: FAIR) will pay 46.17632 cents per unit with 31.18% franking.

Here's a few more…

The Betashares Video Games and Esports ETF (ASX: GAME) will pay 14.695966 cents per unit.

The Betashares Geared Australian Equity Fund – Hedge Fund (ASX: GEAR) will pay 18.921508 cents per unit with 389.47% franking.

Betashares Geared U.S. Equity Fund – Currency Hedged (ASX: GGUS) will pay 87.057737 cents per unit.

The Betashares Global Cybersecurity ETF (ASX: HACK) will pay 43.465958 cents per unit.

The Betashares Australian Financials Sector ETF (ASX: QFN) will pay 21.176497 cents per unit with 57.69% franking.

Betashares Global Quality Leaders ETF (ASX: QLTY) will pay 67.851406 cents per unit.

The Betashares Australian Resources Sector ETF (ASX: QRE) will pay 10.181135 cents per unit with 82.43% franking.

Betashares Global Uranium ETF (ASX: URNM) will pay 19.732154 cents per unit.

The Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX) will pay 13.102915 cents per unit with 40.39% franking.

The post Own ASX A200, NDQ, or ARMR ETFs? It's dividend payday for you! appeared first on The Motley Fool Australia.

Investors who own these Betashares ETFs below will receive their dividends on 16 July.

According to the schedule, the ex-dividend date is 1 July, and the record date is 2 July.

Dividend pay day for Betashares ETF investors

Here is a summary of the dividend amounts that people invested in this selection of Betashares ETFs will receive on 16 July.

The Betashares Australia 200 ETF (ASX: A200) will pay $1.07576468 per unit with 56.21% franking.

Betashares NASDAQ 100 ETF (ASX: NDQ) will pay 49.021982 cents per unit.

Betashares Australian Quality ETF (ASX: AQLT) will pay 78.670012 cents per unit with 45.7% franking.

The Betashares Global Defence ETF (ASX: ARMR) will pay 53.546615 cents per unit.

The Betashares Asia Technology Tigers ETF (ASX: ASIA) will pay 2.7997434 cents per unit.

Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) will pay 62.133156 cents per unit with 9.65% franking.

Betashares Diversified All Growth ETF (ASX: DHHF) will pay 27.862004 cents per unit with 21.31% franking.

The Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ) will pay 28.781362 cents per unit.

Betashares Climate Change Innovation ETF (ASX: ERTH) will pay 4.524139 cents per unit.

The Betashares Global Sustainability Leaders ETF (ASX: ETHI) will pay 30.660703 cents per unit.

The Betashares Australian Sustainability Leaders ETF (ASX: FAIR) will pay 46.17632 cents per unit with 31.18% franking.

Nope, not done yet!

The Betashares Video Games and Esports ETF (ASX: GAME) will pay 14.695966 cents per unit.

The Betashares Geared Australian Equity Fund – Hedge Fund (ASX: GEAR) will pay 18.921508 cents per unit with 389.47% franking.

Betashares Geared U.S. Equity Fund – Currency Hedged (ASX: GGUS) will pay 87.057737 cents per unit.

The Betashares Global Cybersecurity ETF (ASX: HACK) will pay 43.465958 cents per unit.

The Betashares Australian Financials Sector ETF (ASX: QFN) will pay 21.176497 cents per unit with 57.69% franking.

Betashares Global Quality Leaders ETF (ASX: QLTY) will pay 67.851406 cents per unit.

The Betashares Australian Resources Sector ETF (ASX: QRE) will pay 10.181135 cents per unit with 82.43% franking.

Betashares Global Uranium ETF (ASX: URNM) will pay 19.732154 cents per unit.

The Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX) will pay 13.102915 cents per unit with 40.39% franking.

Want to reinvest your ASX ETF dividends?

A distribution reinvestment plan (DRP) is available for all of these Betashares ETFs.

Betashares must receive your DRP election by 5pm AEST on 3 July.

The post Dividend alert: What Betashares ASX ETFs are paying and when appeared first on The Motley Fool Australia.

This strategy is sometimes referred to as ESG investing –  based on environmental, social, and governance considerations. 

Essentially, these strategies involve advancing particular social or ethical causes and generating financial returns. 

Sometimes this might mean actively investing in companies that are engaged in a specific cause. 

Conversely, investors may choose to actively avoid companies that do not align with their views on environmental or social causes. 

For example, you may avoid companies engaged in manufacturing weapons, tobacco etc.

One way to pool these companies that fit into a category is through an ASX ETF.

Ultimately, investors still want to see their portfolio grow. So let's look at how some of the most popular ethical ETFs have performed so far this year. 

Betashares Australian Sustainability Leaders ETF (ASX: FAIR)

This fund aims to track the performance of an index (before fees and expenses) that are selected on the basis of both positive and negative screening.

This includes Australian companies that are deemed not to have direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations.

The Fund's methodology also preferences companies classified as 'Sustainability Leaders'. This is based on their involvement in business activities aligned to the United Nations Sustainable Development Goals.

Unlike other ethical funds, the FAIR ETF is focussed exclusively on Australian companies. 

It is currently made up of 79 holdings. This includes blue-chip companies like Woolworths Group Ltd (ASX: WOW) and Telstra Group Ltd (ASX: TLS). 

It has performed well so far in 2025, rising 5.20% in that span and more than 14% over the last year. 

Vanguard Ethically Conscious Australian Shares Fund (ASX: VETH)

Offering slightly more diversification in its portfolio with 234 holdings, this ETF uses an exclusion methodology. 

The index excludes companies that the index provider determines are involved in controversial conduct related to principles of the United Nations Global Compact.

For example, securities of companies that have a specified level of business involvement in fossil fuels, nuclear power, alcohol, tobacco, cannabis, gambling, adult entertainment or weapons. 

Its largest holding by a significant margin is Commonwealth Bank of Australia (ASX: CBA). The big four bank makes up more than 13% of the fund. 

It has already risen 7.52% this year – a strong return for investors. 

Vanguard Ethically Conscious International Shares Index Etf (ASX: VESG)

This fund, also from Vanguard, is essentially the international version of the previous fund. 

The ETF's index excludes 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 that the index provider determines are involved in controversial conduct related to principles of the United Nations Global Compact.

This is a heavily diversified, globally focussed fund that includes more than 1,400 holdings. 

However, it is largely exposed to the US, with more than 70% of its holdings being made up of American companies. 

This includes companies like Microsoft, Apple and Amazon. 

So far in 2025 the fund has risen just 1.47%. 

The post Which ethical ASX ETFs have performed the best in 2025? appeared first on The Motley Fool Australia.

This strategy involves targeting one "theme" or sector that aligns with your values, or you anticipate to see growth. 

Essentially you can decide if there is a specific industry, technology, or emerging market that you want exposure to. 

One way to do this is through ASX exchange traded funds (ETFs) that group together companies within a theme or sector into one trade. 

Let's look at how some of these thematic ASX ETFs have performed this year. 

Vaneck Global Defence Etf (ASX: DFND)

One of the biggest winners for thematic investing this year has been in defensive shares. 

The Vaneck Global Defence Etf (ASX: DFND) is up 46.88% so far in 2025. 

It provides exposure to 29 global companies involved in aerospace & defence, research & consulting, application software and electronic equipment & instruments, that are typically under-represented in benchmarks.

Increased military and defence spending amongst global conflict has likely contributed to the rise of this fund. 

It could be ideal for those who anticipate further investment in this area internationally. 

Global X Artificial Intelligence ETF (ASX: GXAI)

As the name suggests, this ASX ETF provides exposure to companies that potentially stand to benefit from the further development and utilisation of artificial intelligence (AI) technology in their products and services. It also includes companies that provide hardware facilitating the use of AI for the analysis of big data.

The AI takeover was all the rage in 2024, which saw the technology sector perform extremely well. 

Momentum has seemingly slowed this year, as this fund is up just over 3% since the start of the year. However it remains up almost 20% over the last 12 months. 

This fund has 85 holdings at the time of writing, which is evenly distributed. No company within the fund makes up more than a 4% holding. 

This ASX ETF could be ideal for investors looking to add global AI companies to their portfolio. 

Betashares Australian Sustainability Leaders ETF (ASX: FAIR)

This ASX ETF is an example of impact investing. This is a responsible investment strategy that focuses on advancing particular social or ethical causes and generating financial returns.

Sometimes this is also referred to as environmental, social, and corporate governance (ESG) investing. 

In the case of FAIR ETF, it includes Australian companies that have passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations.

The fund's methodology also preferences companies classified as Sustainability Leaders based on their involvement in business activities aligned to the United Nations Sustainable Development Goals.

This ASX ETF could be ideal for investors looking to invest ethically, rather than just for strictly financial gain. 

This year, FAIR ETF has brought solid returns, rising 5.72%. It is up more than 14% over the last 12 months. 

The post How have these thematic ASX ETFs performed in 2025? appeared first on The Motley Fool Australia.

This has led to the development of many exchange-traded funds (ETFs) and managed funds with environmental, social, and corporate governance (ESG) mandates.

These funds typically comprise ASX and international shares representing companies with strong ESG credentials.

The specifics of these credentials are determined by the providers who design the funds.

For example, a fund provider may only include international and ASX shares that represent businesses with defined net zero targets in their fund.

Regardless of the specific criteria, ESG-focused ASX shares investors enjoy feeling like they're doing their bit for sustainability and climate action.

And that's all well and good.

But how are these ESG-focused funds performing as investments?

A review of returns for ASX shares investors

In this article, we review new data published by the ASX that quantifies the returns of ETFs and managed funds with ESG credentials over the past three years.

Many of these funds are so new that three years of data is not available, so they have been excluded.

That leaves us with eight ETFs and managed funds with three years of data available.

Remember, these ASX-listed funds may invest in either ASX shares or international shares — or both.

Let's take a look.

Best-performing ASX sustainability shares

Over the past three years:

The BetaShares Global Sustainability Leaders ETF (ASX: ETHI) returned an average of 12.97% per annum. This includes reinvested dividends which have historically averaged a yield of 4.75%.

The Vanguard Ethically Conscious International Shares Index ETF (ASX: VESG) returned an average of 12.26% per annum. This includes reinvested dividends which have averaged a yield of 1.86%.

The Russell Investments Australian Responsible Investment ETF (ASX: RARI) returned an average of 11.02% per annum. This includes reinvested dividends which have averaged a yield of 3.94%.

The Intelligent Investor Ethical Share Fund (Managed Fund) (ASX: INES) returned an average of 10.57% per annum. This includes reinvested dividends which have averaged a yield of 0.91%.

The VanEck MSCI Australian Sustainable Equity ETF (ASX: GRNV) returned an average of 9.91% per annum. This includes reinvested dividends which have averaged a yield of 3.34%.

The iShares S&P/ASX Dividend Opportunities ESG Screened ETF (ASX: IHD) returned an average of 9.89% per annum. This includes reinvested dividends which have averaged a yield of 5.14%.

The BetaShares Global Sustainability Leaders ETF — Currency Hedged (ASX: HETH) returned an average of 8.77% per annum. This includes reinvested dividends which have averaged a yield of 3.84%.

The BetaShares Australian Sustainability Leaders ETF (ASX: FAIR) returned an average of 5.53% per annum. This includes reinvested dividends which have averaged a yield of 2.12%.

A word on ASX ETHI shares

To give you an idea of how these ESG-focused funds work, let's do a quick profile on the top performing ASX share in this regard.

The BetaShares Global Sustainability Leaders ETF aims to track the performance of the Nasdaq Future Global Sustainability Leaders Index (INDEXNASDAQ: NQFGSL) (before fees and expenses).

The index includes a range of large companies identified as climate action leaders.

They operate in a range of industries and locations across the world.

Part of the criteria for inclusion in the index is that none of them have direct or significant exposure to fossil fuels.

Also, none are engaged in activities deemed inconsistent with responsible investment considerations.

About 32% of shares held within the ETHI ETF are global tech stocks.

The top holdings are NVIDIA Corp at 6%, Apple Inc at 4%, and Visa Inc at 4%.

How do the returns compare to index funds?

Let's use three Vanguard index fund products to compare the performance of the ASX sustainability shares listed above.

Are they delivering better returns for investors than plain old index funds?

Over the past three years:

The Vanguard US Total Market Shares Index ETF (ASX: VTS) returned an average of 15.37% per annum. This includes reinvested dividends which have historically averaged a yield of 1.28%.

The Vanguard MSCI Index International Shares ETF (ASX: VGS) returned an average of 13.62% per annum. This includes reinvested dividends which have averaged a yield of 1.87%.

The Vanguard Australian Shares Index ETF (ASX: VAS), which tracks the performance of the largest 300 ASX shares, returned an average of 12.32% per annum. This includes reinvested dividends which have averaged a yield of 4.07%.

As you can see, the ASX sustainability shares profiled above have typically delivered lower returns to ESG-focused investors than index funds.

The post Are ASX sustainability shares delivering for ESG investors? appeared first on The Motley Fool Australia.

Breaking down an ESG ETF

When it comes to ethical ESG ETFs, there are normally two classes that a fund will fall into. There are funds that follow a broad market index, such as the S&P/ASX 200 Index (ASX: XJO), but then 'filter' out any unsavoury companies from the index. And then there are those that invest in a particular ESG-aligned industry, such as renewable energy. There is a big difference between these two approaches.

Let's first look at the index funds. The BetaShares Australian Sustainability Leaders ETF (ASX: FAIR) is one such fund. This ETF tracks an index that screens ASX companies based on ESG criteria such as fossil fuel production, gambling, tobacco, alcohol, environmental destruction and animal cruelty. It holds 80 ASX shares, which includes some big names like Telstra Corporation Ltd (ASX: TLS), CSL Limited (ASX: CSL) and Xero Limited (ASX: XRO). As such, you are still getting some of the diversification benefits a simple ASX 200 index fund might provide, but without the companies that have been identified as not possessing ESG characteristics.

There are other ASX ESG ETFs that follow a similar methodology. The Vanguard Ethically Conscious Australian Shares ETF (ASX: VETH) is one. The VanEck Vectors MSCI Australian Sustainable Equity ETF (ASX: GRNV) is another. There are even funds available that take this approach and apply it to overseas shares instead of ASX companies. Such funds include the VanEck Vectors MSCI International Sustainable Equity ETF (ASX: ESGI) and the BetaShares Global Sustainability Leaders ETF (ASX: ETHI).

What about sector-specific ETFs?

That's only one side of the ASX ethical ESG ETF coin though. There are also a number of funds out there that chase specific ESG sectors. Take the ETFS Battery Tech & Lithium ETF (ASX: ACDC). This fund aims to give exposure to "the energy storage and production megatrend, including companies involved in the supply chain and production for battery technology and lithium mining."

Whilst this fund does not have a specific ESG mandate, it is still focused on an industry with 'green' credentials in aiming to reduce greenhouse gas pollution. However, a fund like this arguably provides less diversification than one of the funds named above. That's because all of the holdings in this ETF are companies that operate in a very specific sector.

The same can be said of the VanEck Vectors Global Clean Energy ETF (ASX: CLNE) or the BetaShares Climate Change Innovation ETF (ASX: ERTH).

Whilst there is nothing wrong with this approach, it's worth pointing out that there is a lot more concentration on one particular section of the ESG market. This carries its own set of risks compared to a more diversified fund.

Foolish takeaway

Ethical ESG investing looks as though it's here to stay as an investing trend. But if you are seeking out ESG funds to invest in, make sure you know what kind of exposure you are looking for. Not all ethical ETFs are equal — some of these funds might be offering a portfolio that's too concentrated for your goals, or risk profile. Just because something has 'ESG' or 'ethical' doesn't mean it's automatically a good investment.

The post An ASX investor's guide to ESG-focused ETFs appeared first on The Motley Fool Australia.

However, pandemics pass and economies eventually recover. And futurists might already be looking ahead to see which industries will lead the world out of this pandemic. Picking individual companies is difficult and risky – particularly in the current climate. However, exchange-traded funds (ETFs) offer an alternative investment option.

Buying ETFs basically means you buy shares in a basket of companies. This gives your portfolio broader exposure to the market than you would otherwise be able to achieve on your own – and hence reduces your risk. But the targeted nature of many modern ETFs also gives you the chance to still be selective about which ASX trends you want to participate in.

Here are three options for targeted ETFs that could tap into growing areas of the economy post-COVID-19.

Betashares Australian Sustainability Leaders ETF (ASX:FAIR)

This Betashares ETF tracks an index of companies that meet various ethical and sustainability standards. These standards are primarily based around exposures to the mining or fossil fuel industries, but also extend to activities that involve animal cruelty or gambling. It also preferences companies that are market leaders in adopting sustainable business practices.

The index excludes Australia's big four banks, and is heavily weighted towards healthcare. Its largest holdings are in companies like Fisher & Paykel Healthcare Corporation Ltd (ASX:FPH) and CSL Limited (ASX:CSL). But it also includes companies in the communications services and technology space.

Climate-conscious investors were already becoming more discerning about where they invested their money prior to the COVID-19 pandemic. This crisis may only advance that trend.    

ETFS ROBO Global Robotics and Automation ETF (ASX:ROBO)

With a real eye to the future, this ETF aims to track an index of up to 200 companies that are global leaders in robotics, automation and artificial intelligence. While it is heavily weighted towards the industrials and IT sectors, it invests across multiple industries, including healthcare. Currently, its largest holding is in US-based computer game company NVIDIA Corporation (NASDAQ:NVDA).

AI and robotics are rapidly evolving ASX trends that could shape the future. This is particularly in a post-COVID-19 world where companies seek to drive efficiencies through automation and more business is conducted digitally. This ETF could give you exposure to the exciting companies that are pushing the boundaries of this technology.

ETFS S&P Biotech (ASX:CURE)

The last ETF on my list provides exposure to the US biotech sector. Biotech is a niche part of the healthcare industry that focuses on the research and development of treatments and vaccines based on genetic engineering.

The index includes companies like Novavax, Inc. (NASDAQ:NVAX) that are in the race to develop a COVID-19 vaccine. However, all these companies develop cutting-edge treatments that will have applications well beyond our current pandemic.

Barriers to entry for this part of the healthcare sector are incredibly high – new companies are required to invest heavily in research and development just to gain a foothold. This means that once a company is established, it can grow its market share and profits rapidly.

The post 3 ASX ETFs tapping into future ASX trends appeared first on The Motley Fool Australia.

What a good idea! Right?

Well, it sounds good.

See, a lot of investors invest in what's known as index funds – either through their own investments or through superannuation. Ethical investing normally concerns these kind of investments, because you already have a choice of where to invest if you own individual shares.

Index funds work by buying the vast majority of companies in a particular country – you essentially own everything on the market.

So for example, a S&P/ASX 200 index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) is a single stock that within itself holds the 200 largest companies on the ASX. The biggest shares like Commonwealth Bank of Australia (ASX: CBA) have more weight in the index and fund than smaller companies like Zip Co Ltd (ASX: Z1P).

You get the good, the bad and the ugly – all in one neat package.

Investors love index funds because they're easy to invest in, you don't have to worry about choosing stocks yourself (you can just buy and hold forever in theory) and they're relatively cheap. IOZ charges a management fee of just 0.09% to illustrate.

But the problem for many investors lies in the above description – you get the good but also the bad (and the ugly). And many investors don't want the latter.

What companies aren't 'ethical'?

You may be concerned about climate change and not want your money in a coal company like BHP Group Ltd (ASX: BHP) or an oil company like Woodside Petroleum Limited (ASX: WPL).

You may not agree with gambling and view it as morally wrong – and so might not be too fond of poker-machine maker Aristocrat Leisure Limited (ASX: ALL).

Yet all three of these companies are in the ASX 200 and will be part-owned by anyone who has exposure to an ASX 200 index fund. You will receive dividends from these companies as part of your distributions, which are funded by the sale of the above products.

International ETFs are perhaps worse from an ethical standpoint.

You may not like smoking or drinking and hence don't want to invest in tobacco companies like Philip Morris International or beer brewers like Anheuser Busch InBev.

Fast food might be an anathema to you and so too the idea of investing in McDonald's Corporation.

You might see nuclear power as a threat to the planet and hence would not be interested in a uranium miner like Blue Sky Uranium Corp.

You might not like the idea of a company making weapons of war, such as Lockheed Martin or Boeing.

Yet all of these kinds of companies are included in your typical 'international' index fund – such as the Vanguard MSCI Index International Shares ETF (ASX: VGS).

But what makes a company 'bad' (or ugly)? Well, that's a subjective question – not everyone's ethics align perfectly.

Alternatively, you may work in the mining industry and not have a problem investing in the company that's hired you.

Or you may love a beer and would like to support your favourite brewing company.

You get the idea. Not everyone's ethics are the same.

But in a typical 'ethical' fund, fossil-fuel miners, 'sin' stocks (like tobacco and alcohol producers) and weapons makers are all usually excluded. It does vary from fund to fund with other ethically-questionable industries like pornography, chemical manufacturing, logging and meat production sometimes thrown in. But most ethical funds are broadly consistent with these 'filters'.

Are there ethical options available on the ASX?

Indeed there are. One example is the BetaShares Australian Sustainability Leaders ETF (ASX: FAIR) – which follows an 'index' of ethically-screened ASX companies. BetaShares also offers the BetaShares Global Sustainability Leaders ETF (ASX: ETHI) – which does the same on a global level.

Australian Ethical Investment Limited (ASX: AEF) is a fund management company that specialises in offering ethical managed funds. This company has seen its shares skyrocket over the past year as it experienced a huge rise in popularity.

The problem with ethical investing

Of all the good that comes into a decision to go for an ethical investment, there's an unfortunate truth that the providers of these funds probably won't tell you.

Not investing your money in a 'non-ethical' company doesn't actually hurt the company. At all. Just like buying your favourite company doesn't really help that company (although hopefully, it helps your wallet).

Most shares are traded on what's called a secondary market. That means you're buying and selling from other investors, not the company itself. Buying a company's shares doesn't mean you're giving the company your money, you're giving it to whoever owned the shares before you.

Just think of shares like second-hand cars. Buying a Ford from your neighbour doesn't benefit Ford Motor Company in any way whatsoever. And boycotting second-hand Fords only makes them cheaper for others who want to buy them by reducing the overall demand in the market.

It's the same principle for investing in shares. Boycotting BHP shares because you don't like coal mining only makes them cheaper for those who still want them. Or even for the company itself, who also always has the option to buy back its own stock. BHP's revenue, profits and dividend payments won't be affected – you are just making it cheaper to access those profits for other investors.

If that wasn't true, tobacco companies wouldn't have been one of the best stocks to invest in for the last hundred years. People have hated tobacco companies for decades (for good reason) – yet that hasn't stopped their shareholders making money hand over fist.

If you really want to help or hurt a company – there's only one way to do it. Either buy or stop buying what that company is selling and tell your friends to do the same. That's it.

Now I understand if you as an investor can't sleep at night knowing you're profiting from the sale of coal, oil, tobacco or alcohol. If that's the case, then avoid by all means! Just don't kid yourself that it's hurting those companies. In a perfect world, perhaps it would. But alas, Utopia remains out of reach and so does this pipedream.

Foolish takeaway

Don't let anyone (including this writer) tell you what and what not to invest in. But if you're paying double the fees that you should be because you think your investing choices are saving the world, you might want to rethink your strategy. As Mark Twain once said "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so".

The post Here's why ASX ethical investing is not as good as it seems appeared first on The Motley Fool Australia.

Many big corporations are also actively positioning themselves in relation to these topics, making public their policies on Environmental, Social and Corporate Governance (ESG) issues, and even using these policies to differentiate themselves from their competitors.

Particularly given the recent devastating bushfires across the country, and the potential link between their severity and the impacts of climate change, now more than ever you might be wondering how you can be more environmentally and socially conscious about where you invest your money.

Here are 3 investment options currently available to you on the ASX.   

1. BetaShares Australian Sustainability Leaders ETF (ASX: FAIR)

This ETF invests in a diversified portfolio of local Australian companies that engage in what BetaShares assesses to be ethical and sustainable business practices. BetaShares aims to screen out companies with significant exposures to a raft of ethically controversial business sectors and activities, including fossil fuels, military armaments, animal cruelty and mandatory asylum seeker detention. It even aims to screen out companies that have a lack of gender diversity on their boards.

The ETF goes even further than a simple screening test, preferencing companies which it deems to be "sustainability leaders". These are companies which derive more than 20% of their revenues from ethical sources, such as renewable energy, recycling or health food products.

The fund is weighted towards healthcare, with CSL Limited (ASX: CSL), ResMed Inc (ASX: RMD), Sonic Healthcare Ltd (ASX: SHL) and Cochlear Limited (ASX: COH) all amongst its top 10 holdings. It does have some limited exposure to the mining industry: lithium producers including Pilbara Minerals Ltd (ASX: PLS), Galaxy Resources Limited (ASX: GXY) and Orocobre Ltd (ASX: ORE) all made the list due to the pivotal role lithium plays in the development of environmentally friendly electric vehicles.

The ETF performed well in 2019, with its share price up over 20% for the year.

2. BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

This ETF adopts a similar screening process to the Australian Sustainability Leaders ETF but applies it to international companies, excluding any Australian companies from its portfolio. One of the fund's stated aims is to identify "climate leaders", which it assesses based on their relative carbon efficiency.

The fund is heavily weighted towards American IT and financial companies, with Apple Inc, Mastercard Inc and Visa Inc together making up almost 14% of the total portfolio. Prior to investing you may want to consider how comfortable you are with having large exposures to companies like Apple and another of the fund's major holdings, Nike Inc, which have historically faced accusations of poor working conditions for staff in their Asian factories.

One key benefit of the Global Sustainability ETF is that it provides cheap international exposure for Australian investors. It outperformed the BetaShares Australian Sustainability fund last year, surging 30% higher in 2019.

3. Australian Ethical Investment (ASX: AEF)

A third option is to invest in Australian Ethical, a Sydney-based wealth management company that operates a suite of managed funds as well as a superannuation product. Australian Ethical adopts a similar approach to BetaShares in that it filters out companies from its investment universe that have exposure to ethically contentious industry sectors, and instead weights its investments towards those companies that are actively pursuing socially and environmentally sustainable business practices. An additional benefit of Australian Ethical is that it engages with companies with the goal of influencing their business practices and advocating for change.

According to a list as of 31 March 2019, Australian Ethical invests in a similar range of local and international companies to BetaShares – although Apple and Nike are conspicuously absent. As with BetaShares, a significant number of Australian Ethicals investments are in the IT, energy, healthcare and biotechnology sectors. It also invests in Pilbara Minerals and Orocobre (though the cynic in me can't help but note the strategy behind categorising these investments as "Other" rather than "Mining" or "Industrials").

Australian Ethical enjoyed a strong 2019, surging more than 130% higher. Given the growing interest in ethical investing, it could continue to deliver equally strong returns over 2020 and beyond.

Foolish takeaway

Investing ethically isn't always easy. The options identified in this article all provide cheap access to a diversified portfolio of apparently ethical companies, but they still may not completely align with your personal values. The broad-spectrum screening rules adopted by these investment vehicles may mean that you still wind up investing in certain companies whose business practices you may not agree with. So, before you invest, always research the fund and its stated aims and policies, and consider to what degree you are comfortable supporting the companies it invests in.

The post 3 ASX shares for the ethical investor appeared first on The Motley Fool Australia.

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. 

The post 2 ETFs for ethical investors appeared first on The Motley Fool Australia.

Here we take a look at why ETFs make great Christmas gifts.

ETFs as gifts

Too often we give and receive gifts that we forget by next Christmas. Our gifts are frequently short term in nature, destined for landfill. But we can give gifts that will give benefits for years to come. By giving the gift of an ETF, you give the recipient the opportunity to receive distributions indefinitely and to benefit from potential capital growth.

ETFs may be intangible, but they confer valuable rights on the holder. ETFs are traded on the ASX like ordinary shares. They generally hold a basket of securities that investors in the ETF gain exposure to. ETFs now exist which provide coverage of virtually every major asset class, commodity, and currency. Further, structured ETFs exist to pursue particular investment strategies and styles.

Holding multiple securities means ETFs come with inbuilt diversification. This provides a degree of protection against unsystematic risks, lowering volatility. ETFs can therefore provide a quick and easy method of portfolio diversification.

A broad range of ETFs are traded on the ASX that are designed to give exposure to everything from corporate bonds to technology shares. These can be used to complement existing portfolio holdings or align with personal values and interests.

ETFs can make a valuable gift for children where possible. They provide the opportunity to teach children about the time value of money and other fundamental investment tenants, and children also have a longer period to hold investments and thus ride out volatility in the market. For example, if a child is gifted $1,000 of in ETFs each Christmas from age 1, which grow at 8% per annum, they will have $37,450 by age 18.

Some gift recipients may have an idea about a particular ETF they are interested in. Others may be happy with your choice. Given the broad range of available ETFs, an ETF can generally be found to fit the tastes and values of the recipient. Here are 6 ETFs that make great Christmas gifts.

For the beginner investor

The Vanguard Australian Shares Index ETF (ASX: VAS) tracks the return of the ASX 300 before taking into account fees, expenses, and tax. The ETF returned 19.36% in the year to 31 October 2019. Management fees are 0.10% and distributions are made quarterly.

The ETF held 303 securities as at 31 October. Top holdings were Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Woolworths Group Limited (ASX: WOW).

For the yield investor

The ETFS S&P/ASX 300 High Yield Plus ETF (ASX: ZYAU) offers exposure to ~40 stocks from the ASX 300 with the highest shareholder yields that meet certain quality and liquidity requirements. The ETF returned 13.61% in the year to 31 October. Management fees are 0.35% per annum and distributions are made quarterly.

Top holdings include Wesfarmers Ltd (ASX: WES) (10.13%), Westpac (9.78%), ANZ (9.73%), Transurban Group Ltd (ASX: TCL) (9.63%), Woodside Petroleum Limited (ASX: WPL) (9.14%), Qantas Airways Ltd (ASX: QAN) (5.50%), South32 Ltd (ASX: S32) (5.23%), and Scentre Group (ASX: SCG) (5.08%).

For the international investor

The iShare Core MSCI World All Cap ETF (ASX: IWLD) provides exposure to a broad range of developed market companies around the world. The ETF tracks the MSCI World Investable Market Index, before fees and expenses. The fund returned 15% to 31 October 2019. Management fees are 0.09% per annum and distributions are made twice yearly.

Top holdings include Microsoft (2.41%), Apple (2.33%), Amazon.com (1.61%), Facebook Class A (1.01%), Berkshire Hathaway Class B (0.92%), JPMorgan Chase & Co (0.88%), Alphabet Class C (0.84%), Alphabet Class A (0.83%), and Johnson & Johnson (0.77%).

For the ethical investor

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 (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%).

For the tech investor

The Betashares NASDAQ 100 ETF (ASX: NDQ) provides exposure to the 100 largest non-financial securities listed on the NASDAQ stock market, by market capitalisation. The ETF tracks the performance of the NASDAQ-100 Index, before fees and expenses. The fund returned 19.90% in the year to 31 October. Management costs are 0.48% per annum and distributions are made twice yearly.

Top holdings include Apple (12.1%), Microsoft (11.6%), Amazon.com (9.0%), Alphabet (8.6%) Facebook (4.9%), Intel (2.9%), Comcast (2.2%), Cisco Systems (2.1%) and Pepsico (2.1%).

For the property investor

The Vanguard Australian Property Securities Index ETF (ASX: VAP) provides exposure to property securities listed on the ASX. Property sectors the ETF invests in include retail, office, industrial and diversified. The ETF tracks the return of the S&P/ASX 300 A-REIT Index before taking into account fees, expenses and tax. The fund returned 21.90% in the year to 31 October. Management fees are 0.23% per annum and distributions are made quarterly.

Top holdings include Goodman Group (ASX: GMG) (17.28%), Scentre Group (15.28%), Dexus Property Group (ASX: DXS) (9.72%), Mirvac Group (ASX: MGR) (9.52%), Stockland Corporation Ltd (ASX: SGP) (8.92%), GPT Group (ASX: GPT) (8.59%), Vicinity Centres (ASX: VCX) (6.43%), and Charter Hall Group (ASX: CHC) (3.92%).

Foolish takeaway

An unexpected and thoughtful gift, ETFs show that you are thinking about someone's future. The range of ETFs available on the ASX means it is easy to find one that matches your recipient's values and interests, or even one that matches your own.

The post Why ETFs make great Christmas presents appeared first on The Motley Fool Australia.

What is an appropriate mix for you will depend on a number of factors. These include your goals, timeframes, and risk profile. Those with longer time horizons may be in a position to take on more risk as they have time to ride out volatility in market returns. People who are comfortable taking on more risk may choose a great proportion of shares over bonds. 

Diversification is part of structuring a portfolio that is right for your needs and goals. Your investment allocation should reflect your current life stage as well as helping shift you to the next one. In order to ensure your portfolio is appropriately structured it is important to understand the different types of diversification.

1. Asset diversification

Asset diversification refers to the mix of assets in your portfolio. This could be comprised of shares, bonds, property, precious metals, or other assets. Various asset types perform differently in different economic environments – in a downturn gold and bonds tend to store value, whereas when the economy is firing, shares tend to outperform. 

The exact mix of assets you hold will depend on your life stage and goals. Those nearing retirement tend to focus on capital preservation and income generation. Others may be focused on capital growth and less concerned about receiving income by way of distributions.

The Betashares Gold Bullion ETF – Currency Hedged (ASX: QAU) is backed by physical gold bullion held in a London vault. Betashares discloses the actual gold holdings backing the fund and value of fund assets daily on the fund website. The fund hedges its US dollar exposure to allow for a transparent exposure to the price of gold. Management costs are 0.59% per annum. 

2. Industry diversification

Industry diversification refers to the mix of industries in which the companies you are invested in operate. It is preferable to invest in companies across a range of industries to ensure you are not too exposed to any one. This way, if there is an industry-wide issue you will not be too badly impacted.  

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: RES) (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%). 

3. Company diversification 

Company diversification refers to the diversity of the individual companies in your portfolio. Modern portfolio theory argues that by holding multiple stocks investors can reduce unsystematic risk, thus maximising returns for a given level of risk. Essentially, holding more shares reduces the volatility of returns on your overall portfolio. 

The iShares Core S&P/ASX 200 ETF (ASX: IOZ) tracks the S&P/ASX200 Accumulation Index befores fees and expenses and returned 19.10% in the year to 31 October. Distributions are paid quarterly and management fees are 0.09% per annum. 

Top holdings include Commonwealth Bank of Australia (ASX: CBA) (7.81%), CSL (6.88%), BHP Group Ltd (ASX: BHP) (6.13%), Westpac Banking Corp (ASX: WBC) (4.63%), National Australia Bank Ltd (ASX: NAB) (4.10%), Australia and New Zealand Banking Group (ASX: ANZ) (3.94%), Woolworths Group Ltd (ASX: WOW) (2.83%), and Wesfarmers Ltd (ASX: WES  (2.61%). 

4. Geographic diversification

Geographic diversification refers to diversifying by physical location. For Australian investors, this means venturing offshore. The ASX represents only a small portion of the investable universe. No single economic region can be expected to consistently outperform. 

The Vanguard MSCI Index International Shares ETF (ASX: VGS) invests in many of the world's largest listed companies in developed countries. It is not hedged so investors are exposed to changes in the value of the Australian dollar. Returns were 16% for the year ended 31 October. 

Management fees are 0.18% per annum and distributions are made quarterly. Exposure is centred on the US (64.3%), followed by Japan (8.6%), United Kingdom (5.6%), France 3.9%, and Canada (3.5%). Top holdings include Apple, Microsoft, Alphabet, Amazon, Facebook, JP Morgan Chase & Co, and Johnson & Johnson. 

5. Strategy diversification

Strategy diversification refers to your mix of investment strategies. Some people are value investors while some seek growth shares. Others prefer small cap shares over large. We all have reasons for choosing the shares that we do. The important thing is not to blindly follow one strategy at the expense of all others.

The iShares Global Healthcare ETF (ASX: IXJ) provides investors with exposure to the S&P Global 1200 Healthcare Sector Index before fees and expenses. The Index measures the performance of biotechnology, healthcare, medical equipment, and pharmaceutical companies globally. The ETF returned 13.64% in the year to 31 October 2019. 

Management fees are 0.47% and distributions are made twice yearly. Exposure is centred on the US (68.05%), followed by Switzerland (10.03%), Japan (6.06%), United Kingdom (4.80%), Germany (2.48%), Denmark (2.26%), and Australia (2.07%). 

Top holdings include Johnson & Johnson (6.70%), UnitedHealth Group Inc (4.94%), Novartis AG (4.33%), Merck & Co Inc (4.24%), Roche Holding Par AG (4.05%), Pfizer (3.92%), Abbott Laboratories (2.80%), Medtronic PLC (2.77%) and Amgen Inc (2.60%). 

6. Time diversification

Time diversification refers to the practice of buying and selling assets over time. Most people add to their portfolio gradually as their assets build up over their lifetime. They may also sell assets along the way. Assets are therefore bought and sold during different points of the market cycle over time. This has the effect of 'averaging out' the effect of poorly timed decisions or poor decisions full stop. 

Foolish takeaway

Diversification is fundamentally a simple concept and one that underpins responsible portfolio management. Putting it into practice can be more complex, however, than it first appears. Patience and a good understanding of your goals are key. 

The post 6 ways to diversify your ASX portfolio appeared first on The Motley Fool Australia.

The images of an emotional Greta Thunberg, the Swedish teenager at the centre of the youth movement for climate action, has been shown countless times this week as part of the global action to demand action on the environment.

With this in mind, here are 3 very different ways that you can look to make an impact and invest in climate action before the end of the year.

1. Invest in renewable energy companies

This is one of the most obvious ways to be part of the global movement, by giving more capital to the Aussie renewable energy companies to invest in more energy generation.

There are several options available on the ASX with my personal favourite being Infratil Energy Ltd (ASX: IFT) following a solid August earnings result and strong development pipeline locked in.

One indirect way to do this is to look at one of the several ethical investment funds available on the ASX such as BetaShares Australian Sustainability Leaders ETF (ASX: FAIR) or BetaShares Global Sustainability Leaders ETF (ASX: ETHI).

Both of these funds seek to invest in companies working for the good of the environment and the world, meaning they could suit the right Fool's portfolio.

2. Invest in the ASX banking sector

While many in the Aussie media have chastised the Aussie banks for their support of coal projects, the reality is that most ASX-listed companies are likely to have some level of interaction with at least one Aussie bank.

The Big Four banks including Commonwealth Bank of Australia Ltd (ASX: CBA) are clearly the biggest lenders, making them a prime target to purchase shares and encourage them to lend in line with your own views.

Another option would be to look at the regional banks such as Suncorp Group Ltd (ASX: SUN) to boost spending on environmentally-friendly projects in rural Australia.

It's important to remember that the major banks have significant lending activities right across corporate Australia, meaning you can also be investing in renewable energy financing by purchasing shares in these Aussie banks.

3. Invest in the Aussie coal miners

This may initially seem counterintuitive when looking to invest in climate action, but the reality is that by boycotting certain companies it can be harder to make change than by being a company owner.

Following the same logic, this is one big knock on "ethical investing" as it seeks to generally avoid purchasing companies that are perceived as 'bad' and invest in 'good' companies.

However, much of the change around corporate Australia is made possible by those that own the companies, as they seek to deliver better outcomes for themselves and align executive interests with their own through the election of the Board and sending a message at the AGM.

If you're passionate about climate action, arguably buying up shares of large Aussie coal miners such as New Hope Corporation Ltd (ASX: NHC) is a viable path to making the change from the inside and being a positive influence in shaping the future here in Australia.

Foolish takeaway

Whatever your stance on climate change, the reality is that there are many ways to try and invest in ASX companies that align with your views.

Some would argue that emotional investing is a misallocation of capital and that you're best to invest in those companies that deliver the best outcomes and use your capital gains to promote good outside of the capital markets.

However you go about it, the reality is that your portfolio is completely yours and everyone can make their own decisions to invest in the best way they see possible!

The post 3 ways to invest in climate change action on the ASX appeared first on The Motley Fool Australia.

Frontier Advisors (an investment advice firm) has lowered their expected returns across all asset classes by 0.25% per annum going forward, with "the primary driver of this downward revision [being] the long-term impact on the global economy of climate change" according to Frontier's principle consultant Philip Naylor.

He added:

There are costs of transitioning to a low carbon economy, but the long-term costs of global warming and extreme weather events are far greater. There are a number of possible future scenarios with the degree of impact dependent on a range of different policy path responses policymakers make in the future.

The 0.25% revision in expected returns is also assuming a 'best case' scenario in which governments around the globe do manage to significantly cut greenhouse gas emissions going forward and keep global warming to below 2 degrees. According to Frontier, the lost-wealth effects will be significantly higher if no action is taken (see the graph below), with a 'no action' scenario resulting in lost returns approaching 1% by the year 2100. The report notes that this might sound less than significant, but it would result in the loss of hundreds of thousands of dollars in lost returns in our retirement funds like superannuation.

This doesn't take into consideration the impact that rising sea levels and increased rates of natural disasters might have on other assets like the family home and other property – I personally wouldn't be too keen on buying a new beach house myself.

What can we do?

Well, if you are worried about climate change and its effect on not only the environment but on your retirement, the obvious solution is to keep up the pressure on our elected leaders and press for change. But closer to the world of finance, you can avoid buying shares of companies involved with climate change. Fossil fuel extractors like BHP Group Ltd (ASX: BHP) and Woodside Petroleum Ltd (ASX: WPL) might not be the best shares for you to own if you'd like to make a stand.

You could also consider an ethical ETF (exchange traded fund) like BetaShares Australian Sustainability Leaders ETF (ASX: FAIR), which invests in a basket of ASX companies that excludes fossil fuel miners, as well as other ethically questionable products like alcohol, gambling, uranium and tobacco.

There is no fate but what we make for ourselves, after all.

The post How climate change is putting your retirement at risk appeared first on The Motley Fool Australia.

Market-wide ETFs are a fantastic investment vehicle and popular ones at that, but the main advantage of an index-tracking ETF – buying the whole market – comes with the caveat that you are buying the WHOLE market, the good the bad and the ugly.

An ASX 200 ETF like iShares Core S&P/ASX 200 ETF (ASX: IOZ) invests dispassionately into the largest 200 ASX companies, regardless of their ethical track records. You may not want your money going into coal companies like Whitehaven Coal Ltd (ASX: WHC) or oil companies like Woodside Petroleum Ltd (ASX: WPL). You may not like the coal-seam gas fracking that Santos Ltd (ASX: STO) does or the poker machines that Aristocrat Leisure Limited (ASX: ALL) makes. But with an ASX 200 ETF, you are getting all of them.

The same problem is magnified with a global ETF. ETFs that track the MSCI World Index – like Vanguard MSCI Index International Shares ETF (ASX: VGS) are very popular. But an ETF like this invests in tobacco companies like Altria and British American Tobacco. Throw in liquor baron Diageo, weapons giant Lockheed Martin and nuclear fuel miner Blue Sky Uranium Corp, and you might have a few people getting cold feet. ETFs might not be as nice as you think.

So what's the solution?

There are many ETFs that track indices but exclude 'unethical' companies – meaning you still get whole-market exposure, but some of the nasties are taken out.

One example is the BetaShares Australian Sustainability Leaders ETF (ASX: FAIR). This ETF invests in 78 ASX companies that do not have involvement with fossil fuels, gambling, tobacco, weapons, animal cruelty, mandatory detention of asylum seekers, alcohol, junk food or human rights concerns, among other criteria.

If you're looking for a more global 'ethical' ETF – you could try BetaShares Global Sustainability Leaders ETF (ASX: ETHI). This ETF holds 100 international companies that follow similar criteria. You are still getting fantastic diversification with quality companies like Apple, Mastercard and Netflix, but you won't be mixing with some of the other less reputable companies out there.

Foolish takeaway

Of course, not everyone's ethics and values are the same – you might love the sport of shooting or think nuclear energy has a role to play in combating climate change. But if you're so inclined, maybe it's time to have a think about whether the investments you might hold – personally, or in your super – reflect where you would like to see your money go.

The post A guide to ethical investing on the ASX appeared first on The Motley Fool Australia.

Here are 3 easy investments that you can comfortably (in my opinion) choose as your first (or second) foray into the world of investing.

Milton Corporation Limited (ASX: MLT)

Milton is what's known as a listed investment company (LIC). This just means that it's job as a company is to invest in other companies. So when you buy one share of Milton, you are buying a share of all the companies that Milton owns (84, by the last count). Milton is known as one of the 'old guard' LICs, which are known for their conservative and steady approach. Some of Milton's top companies include Westpac Banking Corp (ASX: WBC) and Woolworths Group Ltd (ASX: WOW), which you might be familiar with already.

BetaShares Australian Sustainability Leaders ETF (ASX: FAIR)

FAIR is an exchange traded fund (ETF) and, like Milton, invests in a whole bunch of investments through one share. FAIR focuses on Australian companies that don't have exposure to gambling, fossil fuels, tobacco, alcohol and other ethical concerns, making it a nice 'feel-good' investment. With 79 underlying investments, some of FAIR's top holdings include Telstra Corporation Ltd (ASX: TLS) and Cochlear Ltd (ASX: COH). If you're looking for a simple, market-wide investment with an ethical bent, look no further than FAIR.

Coles Group Ltd (ASX: COL)

Although Coles is obviously a more concentrated investment, I've included it because everyone will be familiar with that red 'down-down' hand. If you want to invest in individual shares, I think one of the most important things you need to do is understand the company very well, and Coles is a good candidate (it's no 'hot new' tech disruptor, that's for sure). Coles only joined the ASX last year but has already outlined its plans for the next few years, so if you're thinking about making an individual stock pick, have a read of Coles' plans and see what you think.

Foolish takeaway

Getting started in shares can be a very scary process! But with practice and patience, you can really make it work for you for the rest of your life. I think any of these three stocks would be a good place to get started, with the first two picks being very easy, uncomplicated investments.

The post 3 easy ASX investments for beginners appeared first on The Motley Fool Australia.