Environmental, social, and governance (ESG) investing is now almost a must in the well-balanced modern portfolio. Both the Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (EMSG) and MSCI USA ESG Leaders Equity ETF (USSG) are excellent options.
EMSG is an interesting play, meshing the international diversification aspect of emerging markets with the social responsibility of ESG. It gives investors the opportunity to balance the riskiness of EM markets with the outperformance of ESG.
In general, EMSG seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Emerging Markets ESG Leaders Index (the “underlying index”). The fund will invest at least 80% of its total assets (but typically far more) in component securities (including depositary receipts in respect of such securities) of the underlying index.
The underlying index is a capitalization weighted index that provides exposure to companies with high environmental, social and governance (“ESG”) performance relative to their sector peers. EMSG has generated an 18% return thus far this year:
For the cost-conscious investor, EMSG boasts a low net expense ratio of 0.20%.
The fund’s top holdings as of December 30 boast big tech names in Asia, such as Tencent Holdings and Alibaba. Its top three holdings are focused in China and Taiwan.
Follow the ESG Leaders
ETF investors looking for domestic exposure can turn to the MSCI USA ESG Leaders Equity ETF (USSG). The fund’s next expense ratio comes in at an even lower 0.10% which is 26 basis points lower than its category average.
USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The underlying MSCI USA ESG Leaders Index provides exposure to large- and medium-cap U.S. companies with high ESG performance relative to their sector peers.
The fund features some marquee names like Microsoft, Google, and Tesla (as of December 30). Its largest holding is Microsoft, which makes up about 10% of the fund.
USSG is up over 16% year-to-date:
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