As sustainable investing becomes more mainstream, the menu of exchange-traded funds focused on environmental, social, and governance factors is growing globally. There are now close to 30 such ETFs listed on the London Stock Exchange, with combined assets of £4.8 billion. While in Asia, the menu is still small.
While this expanding choice is great news for investors, it also calls for greater attention. No ESG ETF is created equal, and complexity is on the rise. And it becomes increasingly critical to understand what’s under the hood of these funds. Here we provide a list of key considerations that investors can refer to when choosing an ESG ETF.
What’s the fund’s ESG focus and the metrics it uses?
An investor must first decide whether the focus of an ETF’s underlying index; environmental, social, and/or governance concerns, and the metrics it uses are aligned with the ESG criteria that he or she wishes to emphasise.
