More and more investors are evaluating the environmental, social, and governance (ESG) characteristics of their portfolios. They can still access ETFs that rank highly along ESG factors, even if those funds aren’t specifically marketed or branded as ESG ETFs.
For example, the three dividend-focused ETFs with the highest ESG scores are the Principal Spectrum Tax-Advantage Dividend Active ETF (PQDI), which has a perfect 10 and is the top percentile of not only its peer group but all ETFs; the First Trust Rising Dividend Achievers ETF (RDVY), with a score of 8.56; and the ProShares MSCI Europe Dividend Growers ETF (EUDV), with a score of 8.24.
These ESG scores, from MSCI ESG research, are overall quality scores that measures the ability of all the securities inside an ETF’s portfolio to manage and mitigate environmental and governance risk in the medium- to long-term. The score collates measurements across 77 different ESG metrics.
Meanwhile, the peer percentile shows where the ETF stacks up against other funds in its same category, while the global score measures how the fund does in comparison to all funds in MSCI’s ESG coverage.
About the 3 ETFs
The actively managed Principal Spectrum Tax-Advantage Dividend Active ETF (PQDI) selects dividend-paying stocks that are tax-advantaged at the federal level, including preferred securities, REITs, corporate bonds, and convertibles. This multi-cap, multi-asset fund aims to invest at least 80% of its net assets in dividend-paying securities.
PQDI pairs its perfect 10 ESG rating with a robust dividend yield of 4.69%.
Meanwhile, the First Trust Rising Dividend Achievers ETF (RDVY) tracks the NASDAQ US Rising Dividend Achievers Index, holding 50 U.S. large caps that have been screened for their quality and dividend growth, while eliminating REITs from consideration.
RDVY, which has a dividend yield of 1.21%, is among the top three performers in its class (large cap blend equities), up 157.95% over the past three years.
Finally, the ProShares MSCI Europe Dividend Growers ETF (EUDV), which has a dividend yield of 1.46%, focuses on companies that have 10 consecutive years of dividend growth in the MSCI Europe Dividend Masters Index. This tiered and equal weighted fund focuses on Europe, a region which has a much longer and deeper tradition of businesses incorporating ESG criteria into their models.
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