Best Regional Equity Tracker Funds
This is part of a series in which we 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).
In a previous post we looked at the global tracker funds that exist with an ethical and sustainable focus. In this post we look at the tracker funds that have a particular regional focus, and how the ethical/ sustainable versions compare against their traditional peers. You can also look at these funds and customise your fund search through our Find Finder.
Click for each Geographic Region
Developed Markets funds have performed extremely well over the past several years- largely driven by the strong returns of the US market. The ethical versions of these funds have performed generally in line with the traditional trackers, with the low-carbon versions performing better than those that weight company selection on ESG factors.
Emerging Markets are typically characteristed by high volatility, but have also delivered high returns over the long term. Companies within Emerging Markets typically have poorer ESG records than in Developed Markets, and so any index that follows this region will generally have a poorer ethical and sustainable profile than within Developed Markets.
Similar to the other geographic regions, the ethical versions of US tracker funds have performed broadly in line with their traditional versions- with the exception of the USA Islamic ETF.
There is only one passive UK tracker fund with a track record of more than one year within our database- the UBS Socially Responsible fund. While this has had a negative return over the past year, and laggard returns compared to global markets, it has fared notably better than its traditional version. One of the primary reasons for this outperformance is that the UK market has a heavy weighting towards oil & gas majors such as BP and Shell, which have performed poorly over the past few years, and the Socially Responsible fund has a low-carbon tilt which has reduced the exposure to these companies.
Similar to the other geographic regions, the ethical versions of the Europe, Japan and Asia Pacific tracker funds have performed broadly in line with their traditional versions. A trend that seems to hold across all of the regional funds- as it was with the global tracker funds- is that the low carbon & ESG- weighted funds have outperformed the ESG only or low-carbon only tilted funds.
Note: The above views are an opinion only and do not constitute financial advice. Past performance may not be indicative of future returns.