8 Well-Rated Sustainable ETFs

These exchange traded funds have a potential to outperform

Ian Tam, CFA 21 April, 2021 | 8:39PM
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Magnifying Glass in Forest

Recently we highlighted several well-rated sustainable mutual funds. Today we turn our attention to sustainable exchange traded funds, or ETFs. Although the sustainable ETF space is new; it has grown quickly. Over two-thirds of sustainable investments from Canadian-domiciled fund managers are available as ETFs. In 2020, there were 41 new sustainable products launched, of which 21 of them were launched as passive products. Suffice to say, the popularity of sustainable ETF investing gives Canadian investors plenty of newer choices.

Today, we narrow down these choices by screening across this universe on these metrics:

  • Are deemed a sustainable investment
  • Have received a Morningstar Quantitative Rating (MQR) of Bronze, Silver or Gold. This rating is Morningstar’s assessment of a fund’s ability to outperform peers in the future, based on our assessment of the parent company, the people managing the fund, and the process used by the fund managers.
  • Have placed in the top half of peers over the trailing 1y period ending March 31, 2021 on a after-fee risk-adjusted basis.

Typically, we would use the Morningstar Star Ratings as a proxy for historical fund performance. However, star ratings are only assigned to funds that have at least three years of history. Hence, to ensure we fairly included most sustainable ETFs in our analysis, we used the 3rd criteria as a proxy for historical performance.

The ETFs that met the requirements are listed in the table below alongside their management expense ratios and ratings. Note that the Morningstar Sustainability Rating, also called the Globe Rating, (which is Morningstar’s assessment of the degree of ESG risk in the portfolio) is also shown in the table, however, was not used in the screening process. 

Name

Morningstar Category

Ticker

MER (%)

MQR

Globe Rating

Fidelity Sustainable World ETF*

Global Equity

FCSW

0.62

Silver

4 Globes

Horizons Global Sustainability Ldrs ETF

Global Equity

ETHI

0.54

Silver

5 Globes

iShares ESG Aware MSCI USA ETF

US Equity

XSUS

0.23

Silver

4 Globes

Invesco S&P 500 ESG ETF CAD Hedged

US Equity

ESG.F

0.17

Silver

4 Globes

RBC Vision Women's Ldrsp MSCI Cnd ETF

Canadian Equity

RLDR

0.29

Bronze

2 Globes

BMO MSCI USA ESG Leaders ETF

US Equity

ESGY

0.22

Bronze

5 Globes

iShares ESG Aware MSCI Canada ETF

Canadian Equity

XESG

0.23

Bronze

2 Globes

CI First Asset MSCI Wld ESG Ipt ETF Comm

Global Equity

CESG

0.61

Bronze

4 Globes

Source: Morningstar Direct

This article does not constitute financial advice. It is always recommended to speak with an advisor or investment professional before purchasing any of the products listed here.

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About Author

Ian Tam, CFA  is Director of Investment Research at Morningstar Canada. 

 

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