The Motley Fool

Sustainable investing: I think these are some of the best ETFs and funds to invest in

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Daffodils in the grass
Image source: Getty Images

Sustainable investing – which seeks to generate a financial return while also considering environmental, social, and governance (ESG) factors – has become popular in recent years. In the same way that people are focused more on sustainability when shopping for food or clothes, many people are increasingly focusing on sustainability when investing their money. 

If sustainable investing is something that interests you, it’s easy to start this way. These days, there are plenty of actively-managed funds and exchange-traded funds (ETFs) that invest on a sustainable basis. And some have performed very well, outperforming major stock market indices over time.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

With that in mind, here’s a look at a selection of sustainable funds and ETFs I like.

Sustainable investing funds

Whether you’re looking for UK equity exposure or global equity exposure, you’ve plenty of options when it comes to sustainable investment funds. Funds I hold in high regard include:

  • Royal London Sustainable Leaders. This invests in businesses that are deemed to make a positive contribution to society. It invests predominantly in UK businesses but also has a little bit of exposure to the US and Europe. It has returned about 30% over the last three years (vs -7% for a FTSE 100 tracker).

  • Liontrust Sustainable Future Global Growth. This seeks to identify companies around the world that not only have strong growth prospects but also offer products or services that make a positive contribution to society. Over three years, it’s returned about 61% (vs 25% for a FTSE All-World index tracker).

  • Janus Henderson Global Sustainable Equity. This aims to invest in companies whose products and services are considered by the investment manager as contributing to positive environmental or social change. It’s delivered a return of about 50% over three years.

  • BMO Responsible Global Equity. This only invests in companies whose products and operations aren’t considered to be harming the world, its people, or its wildlife, and are making a positive contribution to society. It has returned roughly 44% over three years.

  • Fundsmith Sustainable Equity fund. This is a relatively new fund from the team at Fundsmith. It has a similar philosophy to that of Fundsmith Equity but won’t invest in businesses in certain sectors, such as Alcoholic Beverages or Tobacco. It’s performed well since launch, easily beating its benchmark.

Sustainable ETFs

If you prefer to invest in ETFs, which are generally more cost-effective than actively-managed funds, here are some options to consider: 

  • The iShares Dow Jones Global Sustainability Screened UCITS ETF. This ETF offers exposure to a broad range of global companies that have been screened for their economic, environmental, and social characteristics. It screens out companies involved in industries such as alcohol, tobacco, gambling, firearms, and adult entertainment. It’s returned about 6% per year since its inception in 2011.

  • The iShares MSCI World SRI UCITS ETF. This ETF aims to provide access to global markets through companies with outstanding ESG ratings and minimal controversies. It screens out companies involved in the oil & gas, weapons, tobacco, firearms, alcohol, and gambling industries. It has returned about 10.2% per year since its launch in 2017.

As you can see, investors have plenty of options today when it comes to sustainable funds and ETFs. My advice, if you’re keen to invest in sustainably, is to spread your money over a few different funds, or ETFs, in order to reduce your risk.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Edward Sheldon has a position in Fundsmith Equity. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.