So, let's take a look at which ETFs investing in Australian shares did best in 2023 based on total returns (that is, share price gains and dividend returns combined).

For the purposes of this article, we're focusing on ETFs that invest in Australian shares only, and with a defined investment strategy. That means we're excluding index-based and sector-based ETFs.

These rankings are based on data just released by the ASX.

The top 5 ASX ETFs for total returns in 2023

There is a clear theme among the best ETFs of last year — environmental, social, and corporate governance (ESG).

According to the data, here are the top five ETFs:

iShares S&P/ASX Dividend Opportunities ESG Screened ETF (ASX: IHD) returned 11.51% in share price growth and distributions over the 12 months of 2023.

iShares Core MSCI Australia ESG Leaders ETF (ASX: IESG) returned 10.73% in 2023.

Vanguard Ethically Conscious Australian Shares ETF (ASX: VETH) returned 9.98% in 2023.

Russell Investments Australian Responsible Investment ETF (ASX: RARI) returned 9.88% in 2023.

VanEck MSCI Australian Sustainable Equity ETF (ASX: GRNV) returned 9.83% in 2023.

EGS shares represent companies with good environmental, social, and governance credentials based on certain criteria.

In this era of climate change and decarbonisation, investors are increasingly seeking to support companies that are doing their bit to save the planet, so ESG stocks are becoming more popular.

More about the No. 1 ETF

According to ETF provider Blackrock, the iShares S&P/ASX Dividend Opportunities ESG Screened ETF invests in up to 50 ASX shares that offer high dividend yields and meet certain sustainability tests.

They also have to meet diversification, profitability and tradability requirements.

The IHD ETF closed at $13.88 per share on Thursday, up 0.58% for the day.

Among the top 10 holdings of the IHD ETF are major miners like BHP Group Ltd (ASX: BHP), big four banks including Commonwealth Bank of Australia (ASX: CBA), Telstra Group Ltd (ASX: TLS), Aurizon Holdings Ltd (ASX: AZJ), JB Hi-Fi Limited (ASX: JBH), and QBE Insurance Group Ltd (ASX: QBE).

The post Which ASX ETFs holding Aussie shares delivered the best returns in 2023? 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.

Leading ETF provider BetaShares estimates $4.8 billion of net inflows into ETFs in January to May alone this year. Fixed-income ETFs have received the most inflows at $2.5 billion, with Australian shares ASX ETFs attracting $1.6 billion of net inflows, and cash ETFs bringing in $688 million of net inflows.

BetaShares says ETF investing has recorded a compound annual growth rate (CAGR) of 43% since they were first invented and launched in 2001.

New data from the ASX quantifies the returns of ASX ETFs over the past three financial years.

In this article, we take a look at the top five performers for total investor returns.

The top 5 ASX ETFs for total returns

For the purposes of this article, we're going to focus on the ASX ETFs that invest in Australian shares only, based on a certain strategy.

We're excluding the index-based and sector-based ETFs that do not have a manager executing a defined strategy.

This way, we get a peek at which ETF providers are performing best, and also which investing strategies are delivering the top results right now.

According to the data, here are the top five ASX ETFs:

The BetaShares Geared Australian Equity (Hedge Fund) (ASX: GEAR) ETF returned an average of 24.95% per annum. This includes reinvested dividends which have historically averaged a yield of 4.89%.

Vanguard Australian Shares High Yield ETF (ASX: VHY) returned an average of 17.13% per annum. This includes reinvested dividends which have historically averaged 5.04%.

The SPDR MSCI Australia Select High Dividend Yield (ASX: SYI) ETF returned an average of 14.62% per annum. This includes reinvested dividends which have historically averaged 5.76%.

Russell Investments High Dividend Australian Shares ETF (ASX: RDV) returned an average of 12.41% per annum. This includes reinvested dividends which have historically averaged 5.36%.

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

More about the No 1 ETF

ASX ETF BetaShares Geared Australian Equity Fund (Hedge Fund) gives investors a cost-effective way to access geared exposure to the returns of the S&P/ASX 200 Index (ASX: XJO).

So, it's like an index fund for the ASX 200 but with a special strategy.

That strategy is to use leverage — or borrowed funds — to magnify returns.

The GEAR ETF currently has a leverage of 2.3x. That means it seeks a return of 2.3x the ASX 200 on a daily basis. But leverage goes both ways. It also magnifies losses in the same multitude.

The old saying is that leverage can provide 'an elevator to the ceiling — and the basement'.

Here is a chart documenting the performance of this Australian shares ASX ETF against the ASX 200 over the past three years.

The post Which Australian shares ASX ETFs are delivering the best returns for investors? appeared first on The Motley Fool Australia.

New Prime Minister and Labor leader Anthony Albanese has promised a 43% reduction in carbon emissions by the year 2030 relative to 2005 levels.

With that backdrop in mind, it's prudent to check in and see how ASX renewable energy shares have tracked in May.

Green shares are in the red

Whilst there's no specific set of indices covering the ESG or renewables segment in Australia, ETFs tracking the sector have stumbled hard in 2022.

The Vaneck MSCI Australian Sustainable Equity ETF (ASX: GRNV) has fallen around 6% this month and is down 12% this year to date.

Whereas the Russell Investments Australian Responsible Investment ETF (ASX: RARI) slipped by roughly half that amount in May.

On the individual level, renewable energy players such as Infratil Ltd (ASX: IFT) have taken a knock in May, trading 3% down month to date.

Meanwhile, other tickers in the space including Genesis Energy Ltd (ASX: GNE) and Hazer Group Ltd (ASX: HZR) have slipped by 5% and 13% this month to date respectively.

It's all relative though, as Einstein might say. Comparing to the S&P/ASX 200 Index (ASX: XJO), each of these names – plus ETFs tracking the sector – are trailing the benchmark.

The month to date returns for May in each of these vehicles are plotted on the chart below.

The post How have ASX renewable energy shares been performing in May? appeared first on The Motley Fool Australia.

As a sector – which is still poorly defined on Australian public markets, mind you – renewables have lagged other segments such as financials, utilities and materials this year.

How can we tell? Whilst there's no specific ASX renewables index, EFTs tracking the segment have crept downwards this year, as is shown further below.

Evidently, as markets have endured volatility in 2022, that's translated to a fairly strong headwind for ASX renewables shares, and at the end of the day, the sector is in the red in 2022.

Nonetheless, scaling back to the start of the year, some names have absorbed losses better than others. Let's take a look at those.

'Green' shares aren't in the green

Unfortunately, on an individual stock level, what we define as a 'renewables' share is quite narrow. Actually, there are no real winners per se, but some shares absorbed selling pressures better than others.

Let's talk in terms of energy first and, with that, results aren't good.

Renewables investor Infratil Ltd (ASX: IFT) is down 2.45% year to date but has whipsawed higher over the past three months. Although, its price chart looks like a 9.0 scale reading on the Richter scale.

Meanwhile, Genesis Energy Ltd (ASX: GNE), owner of a diverse portfolio of thermal and renewable generation assets located in different parts of New Zealand, has slipped 3.3%.

Trends are similar across the board and it appears any capital that's left the sector has been shipped straight across to the adjacent resources, traditional energy, and wider commodities segments.

Alas, it's no better for the exchange-traded funds (ETFs), with the Vanguard Ethically Conscious International Shares INDEX ETF (ASX: VESG) creeping down by 13%.

Meantime, the VanEck MSCI Australian Sustainable Equity ETF (ASX: GRNV) has fallen by more than 5% and is in a similar vein to the product above.

Finally, the Russell Investments Australian Responsible Investment ETF (ASX: RARI) has crept up hard in 2022 and is 4 basis points higher in that time.

It's important to zoom out

Longer term – since last January to be specific – the picture's a bit different. Three of the four securities have remained buoyant over that time, albeit Genesis Energy, which slipped more than 21% into the red.

The VESG ETF seems to have outperformed this bunch and was the star player until volatility crept in this year and it has since consolidated returns.

It has now levelled off and is rangebound alongside the fellow MSCI Australian Sustainability ETF from VanEck.

That's something to think about.

The post Here are the best ASX renewables shares of the year so far appeared first on The Motley Fool Australia.