Socially responsible ETFs that follow companies engaged with green investments or environmentally friendly initiatives are beginning to gain in popularity. But what exactly defines these types of green companies or sustainable investing?

“Sustainable investing is a broad term for investment approaches that consider environmental, social and governance (ESG) factors and their impact. The category includes strategies that fall along a spectrum, with ESG Investing the most commonly used term,” Sharon French, Head of Beta Solutions at OppenheimerFunds, said in a research note.

The sustainable investing theme has quickly gained momentum. As of 2016, ESG-focused strategies held $8.1 trillion of the $40.3 trillion in professionally managed assets in the U.S. Of those ESG assets, $2.6 trillion were invested in retail-focused funds, compared to $1.01 trillion in 2012 and $202 billion in 2007.

Currently, there are about 500 ESG-related mutual funds and ETFs with $1.7 trillion in assets under management.

For instance, the Oppenheimer ESG Revenue ETF (NYSEArca: ESGL) and Oppenheimer Global ESG Revenue ETF (NYSEArca: ESGF) are two relatively new options in the space.

ESGL targets broad U.S. large-caps through the S&P 500 but screens through Sustainalyics’ proprietary scoring system that focuses on those with positive ESG attributes and employs a revenue-weighted methodology.

ESGF, on the other hand, takes a global approach. The ETF tries to outperform the MSCI All Country World Index with strong ESG practices and re-weights companies based on revenue earned. MSCI ESG Research utilizes a proprietary ESG scoring system and screens companies based on Sharpe Ratio, a measure of risk-adjusted performance.

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