iShares has been the leader in the exchange-traded funds (ETF) marketplace for over 20 years. They offer more than 800 different products and have over 2 trillion dollars under management.
iShares is a subsidiary of BlackRock and as you know from my last article (Right Here!), BlackRock has a strong focus on sustainable and ESG investing. This commitment to ESG investing can also be seen with iShares as well.
iShares has 29 different sustainable ETFs to choose from and 13 of those funds are pretty new and were created only over the last year. So I’d expect that their ESG lineup will only continue to grow over time.
iShares Sustainable ETFs
iShares breaks down their sustainable ETFs into 5 different categories. The purpose of this article is to just to take a high-level look at iShares’ ETFs so I’m not going to go into an incredible amount of depth with each of their 29 ESG funds.
But just know the iShares’ website has a lot of information about each specific ETF so you can really dive in deeper if you see a fund you’re interested in.
ESG Screened ETFs
iShares’ “ESG Screened” funds seek to eliminate exposure to certain controversial business activities that pose risks or do not align with an investor’s preferences.
Basically, these funds use a negative screening process to eliminate companies that do not live up to the fund’s ESG standards.
These funds screen out companies involved in any of the following 6 different products or services:
- controversial weapons
- small arms
- oil sands and shale energy
- thermal coal
- fossil fuel reserves.
iShares has 3 different ESG screened ETFs.
XVV is the iShares ESG Screened S&P 500 ETF. This is basically a screened version of the S&P 500 index and is made up of strictly large market-cap stocks.
XJH is the iShares ESG Screened S&P Mid-Cap ETF. This fund is made up of about 400 mid-cap US stocks.
And lastly, XJR is the iShares ESG Screened S&P Small-Cap ETF. This ETF is made up of around 600 small market-cap US stocks.
Fees and expense ratios are extremely important whenever you’re looking at mutual funds and exchange-traded funds. iShares keeps the expense ratios of these 3 funds pretty low. The expense ratios for these funds range between 0.08% and 0.12%.
The performance of these funds varies pretty greatly but that’s also to be expected since we are looking at funds of varying market capitalizations.
These screened funds can be a good tool for investors who are looking to fairly closely match a small, mid, or large-market cap index but who also want to screen out some of the more controversial companies from their portfolio.
ESG Aware ETFs
iShares’ “ESG Aware” exchange-traded funds balance seeking a similar risk and return to the relevant broad market with seeking a more sustainable outcome.
These funds use a similar negative screening process as the “Screened ETFs” but the ESG Aware funds also utilize a positive screening process as well. This just means that the ESG Aware funds also include companies that have positive environmental, social, and governance characteristics.
Like I said, the ESG Aware ETFs use a similar negative screening process as the ESG Screened ETFs but there are some slight differences. The ESG Aware ETFs exclude companies involved in:
- controversial weapons
- civilian firearms
- oil sands
- thermal coal
iShares offers a total of 6 ESG Aware ETFs. Three of these are stock funds and three are bond funds.
ESGU is the iShares ESG Aware MSCI USA ETF. This ETF contains about 300 US mid and large-market cap stocks.
ESGD is the iShares ESG Aware MSCI EAFE ETF. This fund is made of companies from developed markets like the United Kingdom, Japan, France, Switzerland, Germany, etc. This fund excludes US and Canadian companies. It also holds around 500 different stocks.
ESGE is the iShares ESG Aware MSCI EM ETF. This is an interesting one because this is an emerging markets fund and there really doesn’t seem to be too many ESG-specific emerging market funds out there. This ETF holds around 300 different stocks from countries like China, Taiwan, South Korea, India, and South Africa, among others.
The expense ratios of these three funds start to creep up a little bit compared to the ESG screened ETFs. These fees range between .15% and .25%.
The next three funds are all fixed income ETFs.
The first is EAGG, the iShares ESG Aware U.S. Aggregate Bond ETF. This fund is made up of over 3,400 different bonds. It is pretty broad and includes treasuries, mortgage-backed securities, agency bonds, and there are even some corporate bonds thrown in for fun.
SUSC & SUSB
The next two funds are both corporate bond ETFs. SUSC is the iShares ESG Aware USD Corporate Bond ETF and SUSB is the iShares ESG Aware 1-5 Year USD Corporate Bond ETF.
The main difference between these two funds is the average maturity of the bonds within these funds. The weighted average maturity for SUSC is about 12 years. Since SUSB is meant to be a shorter-term bond fund, the weighted average maturity of this fund is right around 3 years.
One other difference between these funds is the number of holdings. SUSC holds around 3,400 bonds while SUSB contains around 1,200.
The expense ratios of these 3 bond funds range between .10% and .18%.
ESG Advanced ETFs
iShares’ “ESG Advanced” exchange-traded funds prioritize higher-rated ESG companies while extensively screening out controversial activities.
These funds exclude more companies and industries than the ESG Aware or the ESG Screened ETFs. Positive screening is also a priority so highly rated ESG companies are included in this fund.
The ESG Advanced ETFs negatively screen out companies involved in:
- adult entertainment
- civilian firearms
- conventional weapons
- controversial weapons
- for profit prisons
- fossil fuels
- genetically modified organisms
- nuclear power
- nuclear weapons
- palm oil
- predatory lending
There are 3 different ESG Advanced stock ETFs and 2 ESG Advanced fixed income funds.
The ESG Advanced Stock ETFs are designed in a similar way as the ESG Aware Stock ETFs.
USXF is the US ESG Aware ETF.
DMXF is the developed markets ETF.
And EMXF is the emerging markets ETF.
Each of these funds holds around 300 to 500 different companies and the expense ratios here range between 0.1% and 0.16%.
The two ESG Advanced Bond ETFs are EUSB and HYXF.
EUSB is the iShares ESG Advanced Total USD Bond Market ETF. This ETF is designed to be an ESG focused version of the overall bond market so it holds around 2,200 bonds. The expense ratio here is 0.12%.
HYXF is the iShares ESG Advanced High Yield Corporate Bond ETF. This fund is more specific since its goal is to incorporate corporate bonds from ESG leaders. This ETF holds around 600 bonds and has an expense ratio of 0.35%.
Besides iShares’ ESG Screened, ESG Aware, and ESG Advanced funds, BlackRock also offers both thematic and impact investing options. If you’re interested in learning more about the different ESG investing strategies check out my previous article here!
iShares’ impact investing strategy focuses on measuring ESG impact and outcomes. There is just one ETF in this category.
This is BGRN, the iShares Global Green Bond ETF. This is a green bond fund so it focuses on bonds issued specifically to fund environmental projects. This ETF has an expense ratio of 0.20%.
Thematic ESG ETFs
iShares also offers a number of thematic investments. There are a lot of different ESG and sustainable investing themes. We’ll just take a quick look at a few of iShares’ thematic ESG ETFs.
LCTU & LCTD
LCTU and LCTD are carbon transition ETFs. These funds are made up of companies which BlackRock believes are better positioned to benefit from the transition to low-carbon economies. LCTU is the US version of the fund and LCTD includes companies from around the world.
CRBN is the iShares MSCI ACWI Low Carbon Target ETF. This fund seeks to include companies that are less dependent on fossil fuels. This ETF includes companies in developed and emerging markets with a lower carbon exposure than the rest of the market.
SDG is iShares MSCI Global Impact ETF. It includes companies which support the Sustainable Development Goals laid out by the United Nations.
Lastly, IDRV is iShares Self-Driving EV and Tech ETF. This fund is made up of companies that may benefit from growth in the self-driving and electric vehicles industry.
iShares’ thematic ESG ETFs seem to be some of the most expensive, with expense ratios between 0.20% and 0.47%.
Other ESG ETFs
So we’ve already covered 20 different exchange-traded funds from iShares. But this doesn’t even cover iShares’ full lineup of ESG funds. The remainder of these funds fall into what iShares calls its broad ESG fund options.
Many of these funds seem to be fairly similar to the ETFs we’ve already covered. That being said, iShares does a good job of allowing you to sort through these funds so you can filter these by expense ratios, financial performance, ESG ratings and plenty of other characteristics.
What are your thoughts on iShares and these ESG ETFs? Do you have any experience with any of these ETFs and if so what are some of your favorites? Let us know in the comments below!