The Best ESG Funds Of April 2024

If you had to pick just one ESG exchange-traded fund, the Vanguard ESG U.S. Stock ETF would probably be it. With nearly 1,500 holdings, almost all from the U.S., this ETF hods an extremely well diversified portfolio that meet its environmental, social and governance principles. About 70% of the holdings are large-cap stocks, but it also has exposure to mid- and small-cap names.

ESGV abstains from buying stocks that do not meet its ESG criteria. You won’t find adult entertainment, alcohol, tobacco, cannabis, gambling, weapons, coal, oil, gas, or nuclear power firms in the portfolio. The fund also excludes companies that don’t meet certain human rights and anti-corruption standards.

Note that ESGV’s energy sector weighting is nearly 0%. In contrast, the fund has roughly one-third of its shareholders’ money at work in the technology sector. It has roughly 15% in health care and slightly less in financial services and consumer cyclicals.

The Pimco Enhanced Short Maturity Active ESG fund aims to preserve capital while maximizing income. This actively managed ETF focuses on the securities of issuers whose ESG practices align with PIMCO’s ESG investment strategy.

EMNT seeks to boost income by investing in high-quality, short-term, dollar-denominated debt. This emphasis positions the fund to benefit from current trends. Interest rate hikes by the Fed make short-term debt increasingly attractive since it’s far less likely than long-term debt to fall in value as rates rise.

In fact, EMNT aims to provide shareholders with higher income than they’d typically expect from a money market mutual fund.

EMNT’s holdings average an effective duration of just short of four months. That’s roughly 50% less than the fund’s Morningstar category average. Effective duration shows the expected price decline of a bond or bond fund when interest rates rise by 1%. In this case, it should decline by about 0.32%.

The fund’s roughly 200 holdings are predominantly U.S. corporate debt and U.S. government agency debt. A small percentage of its portfolio consists of U.S. Treasurys and international debt. Despite being actively managed, the 0.25% management fee is less than two-thirds as much as the 0.405% average for its Morningstar ultrashort-bond-fund category.

With five decades of experience in ESG investing, Nuveen is a veteran in the responsible investing space. However, the Nuveen ESG Dividend ETF has earned a cautionary note: the fund’s average annual return since inception is negative 0.95%.

NUDV, which opened in September 2021, is too young to have much of a track record. Still, here’s what you should like about the fund: Its trailing 12-month dividend yield is nearly a full percentage point higher than its Morningstar large-cap value fund category average. It’s also higher than the broad overall stock market’s, as measured by the popular S&P 500 Index.

This passively managed fund selects high-dividend U.S. stocks, which have been screened for specific environmental, social and governance ESG criteria. Its top holdings include blue-chip stocks like Pfizer (PFE), Pepsico (PEP), Coca-Cola (KO), Merck (MRK), Home Depot (HD) and Cisco (CSCO). If you want a fund positioned to deliver above-average income yield with ESG investing, consider NUDV.

The iShares MSCI Global Sustainable Developmental Goals ETF screens for companies that get most of their revenue from products and services provided in ways that aim to alleviate major social and environmental challenges identified by the United Nations Sustainable Development Goals.

Those 17 goals call on nations to pursue policies including clean energy, environmental sustainability and the elimination of hunger. SDG also screens out companies involved in alcohol, civilian firearms, weapons, predatory lending and tobacco.

The fund currently owns about 160 stocks. The biggest subgroup is U.S. companies. The rest are stocks and other securities from outside the U.S., mainly developed markets. The second biggest subgroup is based in Japan. Next are companies in China.

The fund’s largest market sector weightings are health care and consumer staples, followed by  industrials and real estate. Many non-U.S. companies pay relatively high dividends, which can offset share price declines.

The Fidelity U.S. Sustainability Index Fund is a great low-cost, core stock fund for ESG investors. This passive index fund tracks the MSCI USA ESG Index, and the portfolio includes a wide range of different-sized U.S. companies from diverse industries, with varying dividend yields, earnings growth rates and valuation metrics.

The bulk of FITLX’s 273 holdings are large-cap stocks, and the balance are mid-cap names. Most of them are growth or blend oriented. More than half of the fund’s portfolio is made up of technology stocks , health care and financial services stocks.

Over the past two, three and five years, FITLX has outperformed its large-cap blend category average. Its dividend yield is also higher. Note that the fund earns additional income by lending securities to other investors. Finally, the 0.11% annual fee is tough to beat.

The Fidelity International Sustainability Index Fund adds international diversity to your ESG portfolio. It’s a great choice for this market, as in recent months foreign stocks as a group have outperformed U.S. stocks after years of lagging. FNIDX tracks the MSCI All Country World Index (minus the U.S. components).

The fund’s portfolio includes large-caps international stocks , more than 70% of which are from developed markets. The rest are from emerging markets. Companies included in MSCI’s index are screened for environmental, social and governance factors, relative to their sector competitors.

The portfolio includes around 900 holdings. About 21% of its stocks are in financial services, while tech, industrials and consumer cyclicals account for about 12% a piece. Stocks from Japan, the U.K., France, China and Canada are the top geographies represented in FNIDX.

Founded nearly 50 years ago, Calvert is known for investing in responsible businesses across the globe. If you want a fund with hefty exposure to mid-cap stocks, kick the tires on Calvert US Mid Cap Core Responsible Index Fund. Roughly 80% of its portfolio comprises mid-caps.

CMJAX owns the shares of more than 600 companies. Fund manager Thomas Seto assesses up to 200 variables to measure how potential buys fit Calvert’s environmental, social and governance factors. In its proxy votes, the fund has been a big supporter of gender pay equality. It also favors companies with low or no exposure to fossil fuels as well as carbon and toxic emissions.

The fund’s largest segments are industrial stocks, tech, financial services, health care and consumer cyclicals. At $5,000, CMJAX has the highest minimum initial investment requirement of the funds in this list.

The three funds above are index funds, while the BlackRock Sustainable Advantage CoreAlpha Bond Fund is an actively managed option. Bond issuers are screened in part for their potential to deliver positive societal impact. And although the label on the tin is bond fund, BIAAX strives for both capital appreciation and income.

Unfortunately, rising interest rates mean that many fixed-income investments have suffered price declines. A 1% rise in interest rates would typically cause a 6.07% drop in the price of the fund—recall that bond prices move inversely to changes in interest rates. Analysts expect prices to stabilize once interest rate increases stop.

BIAAX owns around 480 bonds with an effective duration of 6.07 years. This sustainable bond fund owns intermediate-term U.S. Treasury, agency and corporate bonds of varying credit quality, mostly investment grade.