If you’re an investor who is conscious about the social impact of your investing, you can still grow your money by backing socially responsible companies. An easy way to do so is by investing in the best ESG ETFs.
However, we’ve just experienced the cruel bear markets of 2022 which have shrunk the portfolios of many investors. You may be wondering if investing in ESG can still work.
You might also like
Good news, there are still opportunities to grow your money.
We’ve picked out the 10 best-performing MSCI AAA rated ESG ETFs that have returned at least 20% over the last 5 years. Here’s a summary:
| ETF | Ticker | 5-year Returns | YTD Returns | Expense Ratio | Provider | Domicile | MSCI ESG Rating | MSCI ESG Score |
|---|---|---|---|---|---|---|---|---|
| iShares Global Clean Energy ETF | ICLN | 114.48% | -6.33% | 0.40% | iShares | US | AAA | 6.99 |
| Invesco Water Resources ETF | PHO | 70.37% | -13.78% | 0.59% | Invesco | US | AAA | 6.97 |
| First Trust Water ETF | FIW | 63.39% | -14.92% | 0.53% | First Trust | US | AAA | 6.63 |
| iShares Global Water UCITS ETF (Dist) | IH2O | 47.41% | -12.65% | 0.65% | iShs Gl | EU | AAA | 9 |
| LYXOR MSCI WATER ESG FILTERED UCITS ETF (Dist) | WATL | 44.71% | -16.55% | 0.60 % | Lyx M | EU | AAA | 5.9 |
| VanEck Agribusiness ETF | MOO | 40.24% | -9.10% | 0.52% | Van Eck | US | AAA | 6.64 |
| Invesco S&P Global Water Index ETF | CGW | 31.82% | -22.19% | 0.57% | Invesco | US | AAA | 7.05 |
| Invesco Global Water ETF | PIO | 26% | -23.84% | 0.75% | Invesco | US | AAA | 7.71 |
| Ecofin Global Water ESG ETF | EBLU | 24.42% | -25.82% | 0.40% | Ecofin | US | AAA | 7.57 |
| iShares ESG Advanced MSCI USA ETF | USXF | 20.68% | -21.94% | 0.10% | iShares | US | AAA | 9.1 |
1) iShares Global Clean Energy ETF (NASDAQ: ICLN) +114.48%
ICLN gives you exposure to companies that produce clean energy from solar, wind and other renewable sources around the world.
At the point of writing, the top 10 holdings include:
| Ticker | Company | Industry | Weightage (%) |
| ENPH | ENPHASE ENERGY INC | Information Technology | 8.5 |
| VWS | VESTAS WIND SYSTEMS | Industrials | 7.13 |
| IBE | IBERDROLA SA | Utilities | 6.96 |
| ED | CONSOLIDATED EDISON INC | Utilities | 6.49 |
| SEDG | SOLAREDGE TECHNOLOGIES INC | Information Technology | 6.04 |
| FSLR | FIRST SOLAR INC | Information Technology | 5.44 |
| ORSTED | ORSTED | Utilities | 3.61 |
| EDP | EDP ENERGIAS DE PORTUGAL SA | Utilities | 2.88 |
| ELET3 | CENTRAIS ELETR BRAS-ELETROBRAS | Utilities | 2.81 |
| ADANIGREEN | ADANI GREEN ENERGY LTD | Utilities | 2.41 |
ICLN also gives you exposure to a global selection of clean energy companies, its geographic exposure is as follows:
ICLN returned an impressive 114.48% in the past 5 years but is at -6.33% YTD. Although its YTD returns isn’t as enticing, ICLN managed to outperform the S&P500 whose YTD return is at -19.84%. It has an expense ratio of 0.4%.
2) Invesco Water Resources ETF (NASDAQ: PHO) +70.37%
Based on the NASDAQ OMX US Water Index, the Invesco Water Resources ETF provides exposure to companies involved in the conservation and purification of water for homes, businesses and industries.
At the point of writing, the top 10 holdings include:
| Ticker | Company | Weightage (%) |
|---|---|---|
| FERG | Ferguson PLC | 8.78 |
| ROP | Roper Technologies Inc | 8.07 |
| ECL | Ecolab Inc | 7.95 |
| AWK | American Water Works Co Inc | 7.86 |
| DHR | Danaher Corp | 7.83 |
| TTC | Toro Co/The | 4.18 |
| WAT | Waters Corp | 4.12 |
| WTRG | Essential Utilities Inc | 4.06 |
| XYL | Xylem Inc/NY | 4.02 |
| PNR | Pentair PLC | 4.00 |
You’ll get a diversified exposure to a wide range of industries through PHO which include:
PHO returned 70.37% in the past 5 years and -13.78% YTD, outperforming the S&P500 at the point of writing. It has an expense ratio of 0.59%.
3) First Trust Water ETF (NYSEARCA: FIW) +63.39%
The First Trust Water ETF tracks the ISE Clean Edge Water Index that includes companies which derive a substantial portion of their revenues from the potable water and wastewater industry.
At the point of writing, the top 10 holdings include:
| Holding | Weightage (%) |
|---|---|
| Xylem Inc. | 4.73% |
| IDEXX Laboratories, Inc. | 4.64% |
| Agilent Technologies, Inc. | 4.57% |
| IDEX Corporation | 4.48% |
| Roper Technologies, Inc. | 4.20% |
| American Water Works Company, Inc. | 4.05% |
| AECOM | 3.98% |
| Essential Utilities, Inc. | 3.80% |
| Danaher Corporation | 3.78% |
| Tetra Tech, Inc. | 3.77% |
FIW returned 63.39% in the past 5 years but is at -14.92% YTD. It has an expense ratio of 0.53%.
4) iShares Global Water UCITS ETF USD (Dist) (LON: IH2O): +47.41%
IH2O is a Irish domiciled ETF that gives you exposure to the global water industry by tracking the S&P Global Water Index.
At the point of writing, the top 10 holdings include:
| Ticker | Company | Industry | Weightage (%) |
| XYL | XYLEM INC | Industrials | 8.61 |
| AWK | AMERICAN WATER WORKS INC | Utilities | 8.34 |
| UU. | UNITED UTILITIES GROUP PLC | Utilities | 7.07 |
| SVT | SEVERN TRENT PLC | Utilities | 6.78 |
| WTRG | ESSENTIAL UTILITIES INC | Utilities | 6.23 |
| VIE | VEOLIA ENVIRON. SA | Utilities | 4.69 |
| GEBN | GEBERIT AG | Industrials | 3.78 |
| ECL | ECOLAB INC | Materials | 3.53 |
| AQUA | EVOQUA WATER TECHNOLOGIES CORP | Industrials | 3.13 |
| WMS | ADVANCED DRAINAGE SYSTEMS INC | Industrials | 3.12 |
And you’ll get the following geographical exposure too:
IH2O returned 47.41% in the past 5 years and -12.65% YTD, outperforming the S&P500 at the point of writing. It has an expense ratio of 0.65%.
5) Lyxor MSCI Water ESG Filtered UCITS ETF (Dist) (LON: WATL): +47.41%
WATL is a Irish domiciled ETF that gives you exposure listed companies involved in the business of water distribution, utilities and the supply of water-related equipment and water treatment by tracking the MSCI ACWI IMI Water ESG Filtered Net USD Index.
At the point of writing, the top 10 holdings include:
| Ticker | Currency | Weightage (%) | Industry |
| FERGUSON PLC | USD | 7.35 % | Industrials |
| AMERICAN WATER WORKS | USD | 7.09 % | Utilities |
| WASTE MANAGEMENT INC | USD | 6.74 % | Industrials |
| XYLEM INC | USD | 6.73 % | Industrials |
| REPUBLIC SERVICES INC | USD | 6.69 % | Industrials |
| GEBERIT AG | CHF | 6.57 % | Industrials |
| GRACO INC | USD | 5.65 % | Industrials |
| HALMA PLC ORD 10P | GBP | 4.66 % | Information Technology |
| UNITED UTILITIES GROUP PLC NEW | GBP | 4.16 % | Utilities |
| SEVERN TRENT PLC | GBP | 4.02 % | Utilities |
WATL returned 44.71% in the past 5 years and -16.55% YTD, outperforming the S&P500. It has an expense ratio of 0.6%.
6) VanEck Agribusiness ETF (NYSEARCA: MOO): +40.24%
MOO allows you to gain exposure to companies around the world involved in agri-chemicals, animal health and fertilizers, sees, farming, and other agriculture businesses by tracking the MVIS Global Agribusiness Index.
At the point of writing, the top 10 holdings include:
| Ticker | Company | Weightage (%) |
| DE US | Deere & Co | 8.1 |
| ZTS US | Zoetis Inc | 7.93 |
| BAYN GR | Bayer Ag | 6.64 |
| NTR US | Nutrien Ltd | 6.45 |
| CTVA US | Corteva Inc | 5.71 |
| ADM US | Archer-Daniels-Midland Co | 5.7 |
| CNHI US | Cnh Industrial Nv | 4 |
| TSN US | Tyson Foods Inc | 3.92 |
| FMC US | Fmc Corp | 3.2 |
| SQM US | Sociedad Quimica Y Minera De Chile Sa | 3.11 |
Through the MOO ETF, you’ll gain exposure to a geographically diversified basket of stocks:
MOO returned 40.24% in the past 5 years and -9.1% YTD, outperforming the S&P500. It has an expense ratio of 0.52%.
7) Invesco S&P Global Water Index ETF (NYSEARCA: CGW): +31.82%
Another ETF that tracks the S&P Global Water Index, CGW provides exposure to listed companies in developed markets that are involved in the business of water utilities, infrastructure, equipment, instruments and materials.
At the point of writing, the top 10 holdings include:
| Ticker | Company | Weightage (%) |
| XYL | Xylem Inc/NY | 8.65 |
| AWK | American Water Works Co Inc | 8.35 |
| UU/ LN | United Utilities Group PLC | 7.09 |
| SVT LN | Severn Trent PLC | 6.8 |
| WTRG | Essential Utilities Inc | 6.23 |
| VIE FP | Veolia Environnement SA | 4.71 |
| GEBN SW | Geberit AG | 3.79 |
| ECL | Ecolab Inc | 3.54 |
| WMS | Advanced Drainage Systems Inc | 3.14 |
| AQUA | Evoqua Water Technologies Corp | 3.13 |
Here’s how CGW did on its sector and geographical diversity:
CGW returned 31.82% in the past 5 years but is at -22.19% YTD. It has an expense ratio of 0.57%.
8) Invesco Global Water ETF (NASDAQ: PIO): +26%
Another ETF provides exposure to listed companies involved in the business of water conservation and purification in homes, businesses and industries, PIO ETF tracks the Nasdaq OMX Global Water Index.
At the point of writing, the top 10 holdings include:
| Ticker | Company | Weightage (%) |
| FERG LN | Ferguson PLC | 9.01 |
| ROP | Roper Technologies Inc | 7.94 |
| DHR | Danaher Corp | 7.7 |
| PNR | Pentair PLC | 6.58 |
| SBSP3 | Cia de Saneamento Basico do Estado de Sao Paulo | 6.4 |
| AWK | American Water Works Co Inc | 4.08 |
| VIE FP | Veolia Environnement SA | 4.06 |
| GEBN SW | Geberit AG | 4.03 |
| ECL | Ecolab Inc | 3.91 |
| WAT | Waters Corp | 3.87 |
PIO returned 26% in the past 5 years but is at -23.84% YTD. It has an expense ratio of 0.75% which is the highest of the ESG ETFs in this list.
9) Ecofin Global Water ESG ETF (NYSEARCA: EBLU): +24.42%
Tracking the Ecofin Global Water ESG Index, EBLU gives you exposure a global basket of companies involved in solving the water supply/demand imbalance problem through the water cycle process.
At the point of writing, the top 10 holdings include:
| Security Name | Stock Ticker | Weight |
| FERGUSON PLC | FERG LN | 7.64% |
| AMERICAN WTR WKS CO INC NEW | AWK | 7.60% |
| ECOLAB INC | ECL | 7.46% |
| XYLEM INC | XYL | 7.38% |
| IDEX CORP | IEX | 6.46% |
| GEBERIT AG | GEBN SW | 6.23% |
| ESSENTIAL UTILS INC | WTRG | 4.03% |
| VEOLIA ENVIRONNEME | VIE FP | 3.99% |
| TETRA TECH INC NEW | TTEK | 3.99% |
| PENTAIR PLC | PNR | 3.93% |
EBLU returned 24.42% in the past 5 years but is at -25.82% YTD. It has an expense ratio of 0.4%.
10) iShares ESG Advanced MSCI USA ETF (NASDAQ: USXF): +20.68%
USFX gives you exposure to large and mid cap US companies with good ESG rating by tracking the MSCI USA Choice ESG Screened Index. If you wish to invest in ESG friendly companies without having to select a specific industry, this ETF may be something for you.
At the point of writing, the top 10 holdings include:
| Ticker | Name | Sector | Weight (%) |
| MSFT | MICROSOFT CORP | Information Technology | 10.76 |
| NVDA | NVIDIA CORP | Information Technology | 2.41 |
| V | VISA INC CLASS A | Information Technology | 2.14 |
| HD | HOME DEPOT INC | Consumer Discretionary | 2.07 |
| LLY | ELI LILLY | Health Care | 1.89 |
| MA | MASTERCARD INC CLASS A | Information Technology | 1.89 |
| KO | COCA-COLA | Consumer Staples | 1.67 |
| PEP | PEPSICO INC | Consumer Staples | 1.6 |
| AVGO | BROADCOM INC | Information Technology | 1.42 |
| TMO | THERMO FISHER SCIENTIFIC INC | Health Care | 1.35 |
USFX returned 20.68% in the past 5 years but is at -21.94% YTD. It has an expense ratio of 0.1%, making it the lowest fee of the ESG ETFs in this list.
Conclusion
Investing in ESG ETFs can be a great way to boost your returns while also helping the environment.
The 10 high MSCI rating ESG ETFs mentioned above have all delivered over 20% return in the past 5 years, showing that it is possible to generate solid profits without sacrificing ethical and environmental considerations. Although they are in the red in terms of their year-to-date returns, their longer term returns remain encouraging. As a comparison, the S&P500 has a YTD return of -19.84%, which means six of the ESG ETFs on this list actually beat the market!
You may also want to note that the list skews towards ETFs focused on water which could be an indication of the ESG trend in the past 5 years.
If you’re looking for ways to make an impact with your investments, you can start your own due diligence process from some of these ESG ETFs with MSCI AAA ratings.
