Want to invest ethically for a brighter future?
(but still make lots of money)?

Want to invest ethically for a brighter future? (but still make lots of money)?

 Take Rask’s FREE Ethical Investing course today.

  • Online & 100% free
  • ETFs, shares & Super
Want to invest ethically for a brighter future? 
(but still make lots of money)?

 Take Rask’s FREE online Ethical Investing course.

Is the ETHI ETF (ASX:ETHI) the best way to invest ethically?

The Betashares Global Sustainability Leaders ETF (ASX: ETHI) is one of the most popular choices when it comes to ethical investing.

Here are my thoughts on this ASX ETF – including two reasons why I like it, and one reason I don’t.

What is the BetaShares ETHI ETF?

ETHI is one of Betashares’ four “ethical” ETFs, investing in a portfolio of companies identified as “climate leaders” that have also passed screens to exclude companies with significant exposure to fossil fuels and other “unethical” industries. 

ETHI takes an annual management fee of 0.59% per year, pays semi-annual dividends, and has returned 21.57% per year since inception in January 2017. 

Source: Best ETFs ETHI share price chart since inception

Global exposure

The first appealing feature of this ETF to me is global exposure. ETHI’s global focus allows it to invest in some of the global giants like Apple Inc (NASDAQ: AAPL), Tesla Inc (NASDAQ: TSLA) and Netflix Inc (NASDAQ: NFLX), which have all been big contributors to the growth of the fund. 

While a large portion of the ETF’s assets is US-based (around 70%), ETHI also provides exposure to companies based in Japan, Switzerland, the Netherlands, Hong Kong, France and others.

Typically when I’m looking at ETFs to invest in, I favour global exposure as it broadens the scope of possible investments and moves away from the largest ASX-listed companies which are heavily skewed towards mining and financials.

Global exposure allows an ETF to achieve better diversification and opens up the possibility of investing in the best companies in the world, rather than the best companies in your domestic market. 

Global investing does however come with some increased risk, introducing factors such as exchange rate risk and exposure to global political and economic risk. Global exposure is also generally associated with higher management costs.

Sustainable focus

The second reason I like the ETHI ETF is of course the sustainable focus. When selecting investments, BetaShares starts by picking companies from developed markets which meet its usual market cap and liquidity requirements. 

From there, the ethical screening tests start. Companies in the ETHI portfolio must be in the top one-third of performers in their industry in terms of carbon efficiency. There are no fossil fuel producers, no companies with significant involvement in gambling, alcohol, junk food, or armaments, and there are no companies lacking gender diversity at the board level or with known human rights or supply chain issues. 

This approach of using some positive screening and some negative screening goes a long way to ensuring that the companies ETHI invests in could be broadly categorised as “ethical” and has clearly not harmed performance over the last three years.

So what’s the catch?

You may have noticed that throughout this piece I’ve used the terms “ethical” and “unethical” in quotation marks, which leads me to the reason I don’t love ethical ETFs. Ethics are inherently subjective; no two people will always agree on what is ethical and what isn’t. 

This is not necessarily a criticism of ETHI or BetaShares, but more of the idea of an ethical ETF in the first place. I’m pleased to see what ETHI is trying to achieve and it seems like their screening criteria does a good job of excluding the most controversial companies. However, I think it’s difficult to create an ETF that uses a few screening criteria to find a portfolio that everyone can agree is ethical. 

As a broad solution for ethical investing these ETFs certainly have merit, but personally, if I’m looking to invest ethically I’m looking for individual companies that do good for the world, rather than not doing bad for the world. It’s a subtle but important difference that I’m not convinced has been captured by this or other ethical ASX ETFs. 

To read more about the ETHI ETF, check out our free report here.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

At the time of publishing, Max does not have a financial or commercial interest in any of the companies mentioned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better? Please give us us some feedback :)

We care about your experience, please let us know if you have any suggestions to improve our site.