What are your ethics?
I think one of the key questions when it comes to ethical investments is how much excluding does the ETF need to do before it counts as ethical in your eyes? Does simply excluding weapons manufacturers make it ethical? What about tobacco, gambling or businesses involved in major polluting? How about companies involved in promoting unhealthy eating? Can only the businesses of the highest social standing make it into the ETF?
BetaShares, the provider of the ETF, said that BetaShares Global Sustainability Leaders ETF “combines positive climate leadership screens with a broad set of ESG (environmental, social and governance) criteria, offering investors a true-to-label ethical investment solution.”
In addition, BetaShares states that the ETF has been certified by RIAA (Responsible Investment Association Australasia) according to the strict operational and disclosure practices required under the Responsible Investment Certification Program.
This ETF aims to hold businesses that are counted as climate leaders. It excludes gambling, tobacco, armaments, uranium & nuclear energy, chemicals of concern, alcohol, junk foods, pornography, animal cruelty, mandatory detention of asylum seekers, destruction of valuable environments, human rights & supply chain concerns and lack of board diversity (such as no women on the board).
So what shares is it invested in?
Its biggest positions are Apple, Mastercard, Visa, Nvidia, Home Depot, Adobe, Paypal, Toyota, Netflix and ASML.
I think that it’s interesting you can already see a lot of big names have been excluded. Technology names like Microsoft, Facebook, Amazon and Alphabet don’t appear in the largest exposure list. Neither do financial shares like JP Morgan. Even Berkshire Hathaway doesn’t make it in, perhaps for its investment in Coca Cola.
How has BetaShares Global Sustainability Leaders ETF?
Some detractors may say that investing ethically can cost you returns. The current maximum fee for the ETF is capped at 0.59% per annum. That’s low compared to many ethical active fund managers.
Looking at the net returns since inception in January 2017, it has returned 21.2% per year. I think that’s really good. It might tell us that investing ethically actually produces better returns.
Past performance is not a guarantee of future performance. But I think this ETF’s holdings shows it can perform very well. You don’t even need to be looking to invest ethically. I think this ETF is just a clear good performer and could keep doing well. Investments offered by Australian Ethical (ASX: AEF) are another way to invest ‘ethically’.