The best sustainable ETFs in 2023

The best sustainable and ethical ETFs on the ASX. We look at the growth and popularity of sustainable investing in Australia.

Sustainable ETFs listed have increased 51% per year over the last five years. There is now over $10b in money 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 aims to achieve long-term wealth creation by investing in companies that demonstrate positive environmental and social impact. Ethical investing 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 microscope 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, because sustainable investing is so new, many funds use the ESG framework as a marketing tool, rather than there being any real sustainable benefit in their ETF. This is called ‘greenwashing’, and is the practice of making a misleading claim about the sustainable benefits of a product. For example, many investors make the choice to invest in sustainably focused 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 stem 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. iShares have followed the early leaders in Betashares and VanEck in launching their first Australian sustainable ETFs over the past year.

E200SPDR S&P/ASX 200 ESG ETF Fund13.7%N/AN/A
FAIRBetashares Australian Sustainability Leaders ETF14.7%5.5%6.6
GRNVVanEck MSCI Australian Sustainable Equity ETF16.6%9.9%7.9%*
IESGiShares Core MSCI Australia ESG Leaders ETF 16.5%N/AN/A
IMPQeInvest Better Future Fund (Managed Fund)10.8%8.3%N/A
INESInvestSMART Ethical Share Fund (Managed Fund)3.7%10.6%N/A
RARIRussell Australian Responsible Investment ETF11.2%11.0%5.8%
VETHVanguard Ethically Conscious Australian Shares ETF (VETH)15.0%N/AN/A
*GRNV previously tracked the VanEck S&P/ASX Franked Dividend ETF until 25 June 2019, so performance may not be relevant. N/A means that the ETF has not built up enough of a track record since launching to record performance over the specific time period. Source: ASX, Cboe Australia as of June 2023.

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.

ESGIVaneck MSCI International Sustainable Equity ETF18.7%10.1%9.5%
ETHIBetashares Global Sustainability Leaders ETF23.8%13.0%16.2%
HETHBetashares Global Sustainability Leaders ETF – Currency Hedged15.8%8.8%N/A
IWLDiShares Core MSCI World ex Australia ESG Leaders ETF* 24.2%15.3%11.6%
VESGVanguard Ethically Conscious International Shares Index ETF21.8%12.3%N/A
WXOZSPDR S&P World ex Australia Carbon Control Fund* 21.2%12.5%10.7%
WXHGSPDR World ex Australia Carbon Control (Hedged) Fund*16.7%10.9%7.7%
WEMGSPDR S&P Emerging Markets Carbon Control Fund*3.8%3.3%3.5%
Thematic based sustainable ETFs (such as CLNE and ERTH), as well as active ETFs, were excluded. *IWLD,WXOZ, WXHG and WEMG converted their strategies to sustainable options in 2022 and should therefore not reflect the underlying strategies’ performance over the long-term. Source: ASX, Cboe Australia as of June 2023.

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.

GBNDBetashares Sustainability Leaders Diversified Bond ETF – Currency Hedged0.0%-5.0%N/A
VEFIVanguard Ethically Conscious Global Aggregate Bond Index (Hedged) ETF-1.8%-4.5%N/A
AESGiShares Global Aggregate Bond ESG (AUD Hedged) ETFN/AN/AN/A
GOODJanus Henderson Sustainable Credit Active ETF (Managed Fund)N/AN/AN/A
Source: ASX as of June 2023.
If you want to find out what the best and worst Australian ETFs of 2023 are, as well as the most popular – head straight to our 2023 ETF report. Find out everything you need to know about ETFs this year.
  • Marc Jocum

    Investment Manager

    Marc has previously worked for Morgan Stanley, AMP and KPMG. He holds a Bachelor of Business (Finance/Accounting) from the University of Technology Sydney (UTS), and has completed his Chartered Financial Analyst (CFA) Level 1.

Investment Manager

Marc has previously worked for Morgan Stanley, AMP and KPMG. He holds a Bachelor of Business (Finance/Accounting) from the University of Technology Sydney (UTS), and has completed his Chartered Financial Analyst (CFA) Level 1.

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