• The Ethical Investor

Best Ethical & Sustainable Global Equity Tracker Funds

This is part of a series in which we will review ethical and sustainable fund options across a broad range of themes: for example broad market trackers, or passive and active funds with particular a environmental or social focus.


Many investors are now choosing to invest into low-cost passive tracker (or index) funds, designed to track the performance of the broad market, rather than spend a lot of time researching and choosing which active funds to invest into (which on average underform the index anyway).


There are an awful lot of global tracker fund options for investors that aren't as worried about ethical or sustainable investing, but for those that are, there are still quite a few options.


Below we outline the ethical and sustainable tracker funds in our database which aim to track the performance of the broad global equity market. You can also look at these funds and customise your fund search through our Find Finder.


Ethical Exclusions


As you can see, there are a lot of options depending on your interests. All of the funds have some ethical exclusions (i.e. sectors that they won't invest into to such as tobacco or gambling), but some only exclude controversial weapons.


Sustainability Approach


Again, there are a range of approaches towards sustainability offered by funds. While a couple do exclusions only, others give a higher weight to companies that score better on ESG metrics (i.e. companies which are considered more sustainable). Others exclude companies based on whether they have a significantly high carbon footprint, and some- such as the UBS MSCI World Socially Responsible ETF and Xtrackers ESG MSCI World ETF- weight companies based on both their ESG and carbon characteristics.


Performance


For those funds that have been around for several years, it's clear to see that they do not underperform the 'traditional' global index funds that do not incorporate ethical or sustainable criteria. In fact, on the most part, the ethical funds have outperformed over the longer term.


Another interesting thing is that the funds that have more ethical and sustainable factors in their approach- such as a combination of ethical exclusions, ESG- weightings and low carbon- have outperformed those with fewer sustainable factors in place, such as exclusions only. Who'd have thought that sustainability can pay?!


Note: The above views are an opinion only and do not constitute financial advice. Past performance may not be indicative of future returns.