Sustainable ETFs are growing rapidly in Australia and listings have increased 51% per year over the last five years.
There is now over $10 billion invested in ethical and sustainable ETFs, representing 7% of the overall Australian ETF market, up from 6% last year.
What is sustainable investing?
Ethical or sustainable investing (ESG) aims to achieve long-term wealth creation by investing in companies that demonstrate positive environmental and social impact.
Ethical or sustainable investing research uses a framework that filters out companies that don’t meet certain criteria and includes companies that demonstrate good ethical and sustainable practices.
Stockspot launched our Sustainable Portfolios in July 2020 to enable investors to invest in a way that aligns with their values.
We went through the Australian ETF universe with a fine toothed comb to ensure the ETFs we chose were true to label and had strong environmental, social and governance (ESG) screens and integration.
What is greenwashing?
Unfortunately, as sustainable investing is relatively new, many funds use the ESG framework as a marketing tool rather than there being any real sustainable benefit in their ETF.
This practice of making misleading claims about the sustainable character of a product is known as ‘greenwashing’.
Many investors choose to invest in sustainable ETFs because they care about climate change and want to reduce their overall carbon footprint. However, a deeper dive shows that only some of the ETFs available in Australia achieve this objective.
That’s why, even if a sustainable ETF performs well, it’s important that investors do their own research and review exactly how sustainable the underlying investments of their chosen ETFs are.
To avoid greenwashing, investors should review how sustainable investment products filter and define their screening (both positive inclusions and negative exclusions) of companies, and should consistently urge their fund to be transparent with their investment process and portfolio holdings.
The Best Sustainable ETFs on the ASX
Australian Share Sustainable ETFs
There are now eight sustainable Australian share ETFs available on the ASX.
Betashares and VanEck lead the way with the first such ETFs, followed by iShares more recently.
| ETF CODE | ETF NAME | 1-YEAR RETURN | 3-YEAR RETURN (P.A.) | 5-YEAR RETURN (P.A.) |
| E200 | SPDR S&P/ASX 200 ESG ETF Fund | 13.10% | 8.56% | N/A |
| FAIR | Betashares Australian Sustainability Leaders ETF | 8.89% | 2.77% | 5.03% |
| GRNV | VanEck MSCI Australian Sustainable Equity ETF | 10.68% | 5.22% | 6.39% |
| IESG | iShares Core MSCI Australia ESG Leaders ETF | 13.61% | 7.02% | N/A |
| IMPQ | eInvest Better Future Fund (Managed Fund) | 0.25% | -3.04% | 6.35% |
| INES | InvestSMART Ethical Share Fund (Managed Fund) | 13.20% | 5.21% | 10.43% |
| RARI | Russell Australian Responsible Investment ETF | 14.83% | 6.33% | 6.15% |
| VETH | Vanguard Ethically Conscious Australian Shares ETF (VETH) | 15.51% | 6.24% | N/A |
Direct Emissions (Scope 1) are sources owned or controlled by the company. Indirect Emissions (Scope 2) are generated by the production of energy used by the company. Graphs in green are the Stockspot chosen ETFs for our Sustainable Australian share exposure and responsible Australian Shares theme. Graph in light blue is represented by the benchmark (an ETF tracking the S&P/ASX 200). Data for INES and IMPQ not available.
Global Share Sustainable ETFs
There are now 9 broad-based index global share sustainable ETFs available in Australia.
iShares and SPDR recently converted their global share strategies into sustainable ETFs to compete with the market share that Betashares and Vanguard have had.
| ETF CODE | ETF NAME | 1-YEAR RETURN | 3-YEAR RETURN (P.A.) | 5-YEAR RETURN (P.A.) |
| ESGI | Vaneck MSCI International Sustainable Equity ETF | 25.95% | 11.45% | 12.87% |
| ETHI | Betashares Global Sustainability Leaders ETF | 24.05% | 10.28% | 17.56% |
| HETH | Betashares Global Sustainability Leaders ETF – Currency Hedged | 24.00% | 6.17% | |
| IWLD | iShares Core MSCI World ex Australia ESG Leaders ETF* | 26.11% | 13.62% | 14.60% |
| VESG | Vanguard Ethically Conscious International Shares Index ETF | 21.7% | 10.25% | 13.47% |
| WXOZ | SPDR S&P World ex Australia Carbon Control Fund* | 22.28% | 10.68% | 12.77% |
| WXHG | SPDR World ex Australia Carbon Control (Hedged) Fund* | 21.87% | 6.96% | 10.94% |
| WEMG | SPDR S&P Emerging Markets Carbon Control Fund* | 11.26% | -1.17% | 3.31% |
Global Bond ETFs
The Betashares Sustainability Leaders Diversified Bond ETF – Currency Hedged (ASX: GBND) launched in November 2019 and provides exposure to Australian and global green bonds.
iShares and Janus Henderson both launched products in 2022 and 2023 respectively.
Green bonds are issued for projects that provide clear environmental impacts such as renewable energy, pollution prevention, clean transportation and sustainable water.
| ETF CODE | ETF NAME | 1-YEAR RETURN | 3-YEAR RETURN (P.A.) | 5-YEAR RETURN (P.A.) |
| GBND | Betashares Sustainability Leaders Diversified Bond ETF – Currency Hedged | 2.12% | -4.16% | N/A |
| VEFI | Vanguard Ethically Conscious Global Aggregate Bond Index (Hedged) ETF | 1.98% | -3.73% | -1.37% |
| AESG | iShares Global Aggregate Bond ESG (AUD Hedged) ETF | 2.78% | N/A | N/A |
| GOOD | Janus Henderson Sustainable Credit Active ETF (Managed Fund) | 5.47% | N/A | N/A |
