The best socially responsible (SRI) ETFs

How do I invest in sustainable or socially responsible companies?

Socially responsible investing (SRI) is becoming more and more popular. The idea is, that ecologically and socially responsible management makes a company sustainable and ensures sustainable returns on investment.

There are several indices available to invest in social responsibility with ETFs. The major difference between the indices are the excluded industries. This Investment Guide will help you navigate among the peculiarities of SRI indices that vary substantially in their methodologies and SRI ETFs that track them. It will allow you to find the most suitable ETFs for you by ranking them according to your preferences.

0.10% p.a. - 0.38% p.a.
annual total expense ratio (TER) of socially responsible (SRI) ETFs for Europe
on socially responsible investing (SRI) for Europe, which are tracked by ETFs
on socially responsible investing (SRI) for Europe
The best indices for socially responsible (SRI) ETFs for Europe

The best socially responsible (SRI) ETF for Europe by 1-year fund return as of 31/05/20

All socially responsible (SRI) ETFs for Europe ranked by fund return

 

The largest socially responsible (SRI) ETF for Europe by fund size in GBP

All socially responsible (SRI) ETFs for Europe ranked by fund size

 

The cheapest socially responsible (SRI) ETF for Europe by total expense ratio

All socially responsible (SRI) ETFs for Europe ranked by total expense ratio

 
 

SRI indices compared

Regional focus of available ETFs on the most important SRI index families

Regional focus of SRI ETFs

Availability of ETFs depends on investor domicile, deviations from table possible.

Source: justETF Research; As of: 30/11/2019

 

Excluded sectors of the most important SRI index families

Excluded sectors of SRI ETFs

*Further exclusion in subindex

Source: justETF Research; As of: 30/11/2019

 

Performance of European SRI indices in comparison

 

Dow Jones Sustainability indices

Dow Jones Sustainability Indices are designed to measure the stock performance of the leading sustainable companies of their respective region, identified by RobecoSAM through an annual corporate sustainability assessment. The indices represent their respective portion of the global parent index. The index excludes companies that generate revenue from alcohol, tobacco, gambling, armaments and firearms, and/or adult entertainment.

 

Methodology of the Dow Jones Sustainability indices Factsheet Methodology

  • Reassessment takes place annually in September
  • Selection of stocks depends on RobecoSAM rating
  • Criteria is social, economic and ecological sustainability
  • Weighted by float-adjusted market capitalisation
  • Excluded sectors: Alcohol, tobacco, gambling, armaments & firearms, adult entertainment

Regional sub-indices of the Dow Jones Sustainability

Dow Jones Sustainability World ex Alcohol, Tobacco, Gambling and others

 

MSCI ESG Enhanced Focus indices

The MSCI ESG Enhanced Focus indices are characterized by low cost and broad market coverage. These benefits result from a rather straightforward ESG-scanning method. Rather than evaluating companies individually, the MSCI ESG Enhanced Focus indices simply exclude controversial weapons and tobacco producers. The indices are designed to maximize exposure to positive ESG factors while reducing the carbon equivalent exposure to carbon dioxide and other greenhouse gases as well as their exposure to potential emissions risk of fossil fuel reserves by 30 percent (compared to the parent index). Positive ESG exposure is achieved via optimization of the index construction: companies with high (low) ESG Ratings are over-weighted (under-weighted).

 

Methodology of the MSCI ESG Enhanced Focus indices Factsheet Methodology

  • Based on their respective regional parent index
  • Weighted by ESG-criteria: over-weight (under-weight) companies with high (low) ESG Ratings
  • Target 30% reduction in carbon exposure compared with parent index
  • Excluded companies: controversial weapons and tobacco producers

Regional sub-indices of the MSCI ESG Enhanced Focus

MSCI EMU ESG Enhanced Focus
MSCI Emerging Markets ESG Enhanced Focus
MSCI Europe ESG Enhanced Focus
MSCI Japan ESG Enhanced Focus
MSCI USA ESG Enhanced Focus
MSCI World ESG Enhanced Focus

 

MSCI ESG Leaders indices

The MSCI ESG Leaders indices aim for companies that have the highest environmental, social and governance (ESG) rated performance in each sector of the parent index, while excluding companies involved in severe controversies. The MSCI ESG Leaders indices target a 50% sector representation vs. the parent index. The selected securities are weighted by their free float-adjusted market capitalization. In addition, additionally available sub-indices of the ESG Leaders series focus on companies with low carbon exposure and exclude companies with business activities involving tobacco-related products.

 

Methodology of the MSCI ESG Leaders indices Factsheet Methodology

  • Based on their respective regional parent index
  • Best-in-class approach – the indices select the 50 percent highest ESG rated companies in each sector of the parent index
  • Designed to exclude companies involved in severe controversies
  • Some sub-indices focus on companies with low carbon exposure and exclude companies from the tobacco industry
  • Weighted by float-adjusted market capitalisation

Regional sub-indices of the MSCI ESG Leaders

MSCI Emerging Markets ESG Leaders Low Carbon Ex Tobacco Involvement 5%
MSCI Europe ESG Leaders
MSCI Europe ESG Leaders Low Carbon ex Tobacco Involvement 5%
MSCI Japan ESG Leaders Low Carbon ex Tobacco Involvement 5%
MSCI USA ESG Leaders Low Carbon ex Tobacco Involvement 5%
MSCI World ESG Leaders Low Carbon ex Tobacco Involvement 5%

 

MSCI ESG Screened indices

The MSCI ESG Screened indices are characterized by low cost and broad market coverage. These benefits result from a fairly straightforward ESG-scanning method. Rather than evaluating companies individually, the MSCI ESG screened indices incorporate exclusions of specific sectors as a whole. Companies that are involved in controversial or nuclear weapons, civilian firearms, tobacco, thermal coal, or oil sands are excluded from the indices. Furthermore, companies that fail to comply with the United Nations Global Compact Principles are excluded. The remaining securities are weighted by their float-adjusted market capitalization.

 

Methodology of the MSCI ESG Screened indices

  • Based on their respective regional parent index
  • Weighted by float-adjusted market capitalisation
  • Excluded sectors and companies: controversial and nuclear weapons, civilian firearms, tobacco, thermal coal, oil sands, non-compliance with UN Global Compact

Regional sub-indices of the MSCI ESG Screened

MSCI EMU ESG Screened
MSCI Emerging Markets IMI ESG Screened
MSCI Europe ESG Screened
MSCI Japan ESG Screened
MSCI USA ESG Screened
MSCI World ESG Screened

 

MSCI ESG Universal indices

The MSCI ESG Universal indices are characterized by low cost and broad market coverage. These benefits result from a fairly straightforward ESG-scanning method. By default, the MSCI ESG Universal indices exclude only companies found to be in violation of international norms (for example, facing very severe controversies related to human rights, labour rights or the environment) and companies involved in controversial weapons. Some sub-indices add further controversial sectors to this spectrum. The MSCI ESG Universal indices enhance exposure to companies that feature both a high ESG Rating and a positive ESG trend over the most recent 12 months by increasing the weight of these companies. By contrast, the weightings of companies who lag behind their industry peers in terms of ESG quality are reduced.

 

Methodology of the MSCI ESG Universal indices Factsheet Methodology

  • Based on their respective regional parent index
  • Weighted by ESG-criteria: over-weight (under-weight) companies with high (low) ESG Ratings
  • ESG-related improvements by companies are taken into account
  • Exclusion of companies that violate international norms or are involved in controversial weapons

Regional sub-indices of the MSCI ESG Universal

MSCI China ESG Universal 5% Issuer Capped
MSCI Europe ESG Universal Select Business Screens
MSCI USA ESG Universal Select Business Screens
MSCI World ESG Universal Select Business Screens

 

MSCI ex Controversial Weapons indices

The MSCI Controversial Weapons indices are based on their respective regional parent index, and follow the same methodology. The MSCI ex Controversial Weapons Indices however exclude companies from the parent index that are involved with the production of cluster bombs, landmines, chemical and biological weapons and depleted uranium weapons. Constituent selection is based on data from MSCI ESG Research.

 

Methodology of the MSCI ex Controversial Weapons indices

  • Based on their respective regional parent index
  • Weighted by float-adjusted market capitalisation
  • Excluded sectors: chemical/ biological weapons, cluster bombs, landmines, uranium weapons
 

MSCI Low Carbon Leaders indices

The MSCI Low Carbon Leaders indices aim to achieve at least 50% reduction in the carbon footprint of the parent index by excluding companies with the highest carbon emissions intensity and the largest owners of carbon reserves (per dollar of market capitalization). At the same time, the MSCI Low Carbon Leaders indices intent to minimize the tracking error relative to their parent index. The selected securities are weighted by their free float-adjusted market capitalization.

 

Methodology of the MSCI Low Carbon Leaders indices

  • Based on their respective regional parent index
  • Excluding companies with the highest carbon emissions intensity and the largest owners of carbon reserves (per dollar of market capitalization)
  • Reduction of the carbon footprint by at least 50% while minimizing the tracking error, relative to the parent index
  • Weighted by float-adjusted market capitalisation
 

MSCI Select ESG Rating and Trend Leaders indices

The MSCI Select ESG Rating and Trend Leaders indices aim for companies which feature both a robust ESG profile and a positive trend in improving that profile. Companies that are involved in alcohol, tobacco, gambling, nuclear power, conventional weapons, controversial weapons or civilian firearms are excluded from the indices. The index targets sector weights that are similar to the sector weights of the respective parent index in order to limit the systematic risk introduced by the selection process. Overall, the index targets coverage of 50% of the parent index. The selected securities are weighted by their free float-adjusted market capitalisation.

 

Methodology of the MSCI Select ESG Rating and Trend Leaders indices

  • Based on their respective regional parent index
  • Selection of companies which feature both a robust ESG profile and a positive trend in improving that profile
  • Excluded sectors: alcohol, tobacco, gambling, nuclear power, conventional and controversial weapons, civilian firearms
  • Strictest exclusion criteria of all socially responsible MSCI indices
  • Weighted by float-adjusted market capitalisation

Regional sub-indices of the MSCI Select ESG Rating and Trend Leaders

MSCI EMU Select ESG Rating and Trend Leaders
MSCI Emerging Markets Select ESG Rating and Trend Leaders
MSCI USA Select ESG Rating and Trend Leaders
MSCI World Select ESG Rating and Trend Leaders

 

MSCI SRI indices

The MSCI SRI indices aim for companies that have the highest environmental, social and governance (ESG) rated performance in each sector of the parent index and target a 25% representation of each sector’s market cap. Companies whose products have negative social or environmental impacts and companies associated with severe controversies are excluded. This applies to companies that are involved in armaments, firearms, adult entertainment, alcohol, tobacco, gambling, genetically modified organisms, nuclear power, or thermal coal. Overall, the SRI series is characterized by the strictest exclusion criteria of all socially responsible MSCI indices. The selected securities are weighted by their free float-adjusted market capitalization.

 

Methodology of the MSCI SRI indices Factsheet Methodology

  • Based on their respective regional parent index
  • Best-in-class approach – the indices select the 25 percent highest ESG rated companies in each sector of the parent index
  • Excluded sectors: armaments, firearms, adult entertainment, alcohol, tobacco, gambling, genetically modified organisms, nuclear power, thermal coal
  • Strictest exclusion criteria of all socially responsible MSCI indices
  • Weighted by float-adjusted market capitalisation

Regional sub-indices of the MSCI SRI

MSCI ACWI SRI 5% Issuer Capped (GBP Hedged)
MSCI ACWI SRI 5% Issuer Capped (USD Hedged)
MSCI EMU SRI 5% Capped
MSCI EMU SRI 5% Capped (GBP Hedged)
MSCI Emerging Markets SRI 5% Capped
MSCI Emerging Markets SRI Select Reduced Fossil Fuels
MSCI Europe SRI 5% Capped
MSCI Europe SRI Select Reduced Fossil Fuels
MSCI Japan SRI (EUR Hedged)
MSCI Japan SRI 5% Issuer Capped
MSCI Japan SRI Select Reduced Fossil Fuels
MSCI Pacific SRI 5% Capped
MSCI UK IMI Extended SRI 5% Capped
MSCI USA SRI 5% Capped
MSCI USA SRI Select Reduced Fossil Fuels
MSCI World SRI 5% Capped
MSCI World SRI Select Reduced Fossil Fuels

 

Solactive Sustainability indices

The Solactive Sustainability contains the largest companies, measured by free float market capitalisation, that hold the Oekom status “Prime”, and are not involved in abortion, alcohol, oil & coal, embryonic research, furs, gambling, military services of any kind, genetically modified organisms, nuclear power, pornography or tobacco. Furthermore, those companies must refrain from animal testing, business malpractice and controversial environmental practices. Companies and their suppliers/subcontractors also have to respect labour and human rights.

 

Methodology of the Solactive Sustainability indices Factsheet Methodology

  • Contains the largest companies, which hold the Oekom status “Prime”, and are not part of the excluded sectors
  • Weighted by float-adjusted market capitalisation
  • Contained companies and their suppliers represent high moral standards
  • Single stocks are capped at 10% weight
  • Excluded sectors: alcohol, tobacco, oil & coal producers, embryonic research, furs, gambling, military services of any kind, genetically modified organisms, nuclear power, pornography

Regional indices of Solactive

Solactive Sustainable World Equity

 

STOXX ESG-X indices

The STOXX ESG-X indices are characterized by low cost and broad market coverage. These benefits result from a rather straightforward ESG-scanning method, using standard norm- and product-based exclusions that aim to limit market and reputational risks. Based on data from Sustainalytics, STOXX ESG-X indices exclude companies involved in the production of tobacco, fossil fuels or controversial weapons, and companies that violate the principles of the United Nations Global Compact. The remaining securities are weighted by their free float-adjusted market capitalization.

 

Methodology of the STOXX ESG-X indices

  • Based on their respective regional parent index
  • Weighted by float-adjusted market capitalisation
  • Excluded sectors and companies: controversial weapons, fossil fuels, tobacco, non-compliance with UN Global Compact
 
 

Socially responsible (SRI) ETFs for Europe in comparison

The most important factors at a glance

When choosing a socially responsible (SRI) ETF one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF. For better comparison, you will find a list of all socially responsible (SRI) ETFs for Europe with details on size, cost, age, income, domicile and replication method ranked by fund size.

Compare all socially responsible (SRI) ETFs for Europe in detail
Compare all socially responsible (SRI) ETFs for Europe in a chart

Provider
ISIN
  Fund size
in m GBP
TER
in %
Use of profits Fund domicile Replication method
iShares MSCI Europe SRI UCITS ETF (Acc)IE00B52VJ196 1,345 0.20% p.a. Accumulating Ireland Optimized sampling
UBS ETF (LU) MSCI EMU Socially Responsible UCITS ETF (EUR) A-disLU0629460675 659 0.28% p.a. Distributing Luxembourg Full replication
iShares MSCI EMU ESG Screened UCITS ETF EUR (Acc)IE00BFNM3B99 636 0.12% p.a. Accumulating Ireland Optimized sampling
Lyxor MSCI Europe ESG Leaders (DR) UCITS ETFLU1940199711 609 0.20% p.a. Accumulating Luxembourg Full replication
Amundi Index MSCI Europe SRI UCITS ETF DR (C)LU1861137484 453 0.18% p.a. Accumulating Luxembourg Full replication
iShares MSCI Europe ESG Screened UCITS ETF EUR (Acc)IE00BFNM3D14 307 0.12% p.a. Accumulating Ireland Optimized sampling
L&G Europe ex UK Equity UCITS ETFIE00BFXR5V83 86 0.10% p.a. Accumulating Ireland Optimized sampling
L&G Europe Equity (Responsible Exclusions) UCITS ETFIE00BKLTRN76 82 0.16% p.a. Accumulating Ireland Full replication
iShares MSCI EMU ESG Screened UCITS ETF EUR (Dist)IE00BFNM3C07 47 0.12% p.a. Distributing Ireland Optimized sampling
Xtrackers ESG MSCI Europe UCITS ETF 1CIE00BFMNHK08 34 0.20% p.a. Accumulating Ireland Full replication
Invesco MSCI Europe ESG Universal Screened UCITS ETF AccIE00BJQRDL90 25 0.16% p.a. Accumulating Ireland Optimized sampling
iShares MSCI Europe ESG Enhanced UCITS ETF EUR (Dist)IE00BHZPJ676 24 0.12% p.a. Distributing Ireland Optimized sampling
UBS ETF (LU) MSCI EMU Socially Responsible UCITS ETF (hedged to GBP) A-disLU1280300853 22 0.38% p.a. Distributing Luxembourg Full replication
iShares MSCI Europe ESG Screened UCITS ETF EUR (Dist)IE00BFNM3F38 17 0.12% p.a. Distributing Ireland Optimized sampling
Lyxor MSCI EMU ESG Trend Leaders (DR) UCITS ETF - AccLU1792117340 7 0.20% p.a. Accumulating Luxembourg Full replication
iShares MSCI EMU ESG Enhanced UCITS ETF EUR (Dist)IE00BHZPHZ28 2 0.12% p.a. Distributing Ireland Optimized sampling
Lyxor MSCI Europe Climate Change (DR) UCITS ETF AccLU2056738490 2 0.25% p.a. Accumulating Luxembourg Full replication
Amundi Index MSCI Europe SRI UCITS ETF DR (D)LU2059756598 0 0.18% p.a. Distributing Luxembourg Full replication

Source: justETF.com; As of 02/06/20

 

Return comparison of all socially responsible (SRI) ETFs for Europe

The table shows the returns of all socially responsible (SRI) ETFs for Europe in comparison. All return figures are including dividends as of month end. Besides the return the reference date on which you conduct the comparison is important. In order to find the best ETFs, you can also perform a chart comparison.

Source: justETF.com; As of 31/05/20; Calculations in GBP including dividends