Sustainable investing involves aligning investments with ethical and environmental values, focusing on companies that meet ESG (Environmental, Social, Governance) criteria. Large-cap blends are a good choice because they offer stability, diversification, and long-term growth potential. Companies with solid track records and ESG practices can provide strong returns while minimizing risk.
To that end, investors could look to invest in sustainable large-cap ETFs such as the iShares MSCI KLD 400 Social ETF (DSI), Vanguard ESG U.S. Stock ETF (ESGV), and iShares ESG Aware MSCI USA ETF (ESGU) for an ethical portfolio.
Investing in sustainable ETFs that prioritize responsible business practices is a great way to contribute to positive societal and environmental impact. Large-cap ETFs provide sector diversification, reducing individual company risks while maintaining ESG exposure. Companies that meet ESG criteria often demonstrate better management and long-term strategies, which can result in stronger returns.
Notably, JP Morgan highlights that sustainable investing remains crucial for industry change in 2024, with increased global policy support, improved market standards, and evolving definitions of sustainability, focusing on decarbonization and energy transition goals. Hence, investors are presented with diverse opportunities as the landscape grows more complex.
Meanwhile, the U.S. stock market is experiencing broad gains fueled by optimism about economic growth and recent Fed rate cuts. This trend reflects improving market stability across various sectors. Therefore, investing in a large-cap blend ETF could be a smart choice, offering access to the long-term growth potential of large-cap companies while minimizing the risks associated with picking individual stocks.
Considering these conducive trends, let’s evaluate the three sustainable Large Cap Blend ETFs picks, starting with number three.
ETF #3: iShares MSCI KLD 400 Social ETF (DSI)
DSI is an exchange-traded fund launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. The fund invests in the public equity markets of the United States, across diversified sectors. It includes growth and value stocks of companies of varying market capitalizations that are considered socially conscious and promote environmental responsibility. The fund seeks to track the performance of the MSCI KLD 400 Social Index using a representative sampling technique.
With $4.68 billion in assets under management, DSI’s top holding is NVIDIA Corporation (NVDA), with an 11.40% weighting, followed by Microsoft Corp. (MSFT), with an 11.38% weighting, and Alphabet Inc. (GOOGL), with 3.57%. It has a total of 404 holdings.
DSI has an expense ratio of 0.25%, lower than the category average of 0.36%. DSI’s net outflows were $36.20 million over the past month. It currently has a NAV of $108.83.
The ETF pays an annual dividend of $1.12, which yields 1.04% on the current price. It has a four-year average dividend yield of 1.17%. Its dividend payouts have increased at a CAGR of 9% over the past three years and 6.2% over the past five years.
DSI has gained 32.1% over the past year and 18.1% over the past nine months to close the last trading session at $107.57.
DSI’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
DSI has an A grade for Buy & Hold and Trade. It is ranked #32 out of 280 ETFs in the A-rated Large Cap Blend ETFs category. Click here to access all of DSI’s POWR Ratings.
ETF #2: Vanguard ESG U.S. Stock ETF (ESGV)
ESGV is an exchange-traded fund launched and managed by The Vanguard Group, Inc. It invests in the public equity markets of the United States, across diversified sectors. The fund includes growth and value stocks of companies of varying market capitalizations that are considered socially conscious and promote environmental responsibility. It seeks to track the performance of the FTSE US All Cap Choice Index using a full replication technique.
With $9.50 million in AUM, the fund’s top holding is Apple Inc. (AAPL), with a 7.21% weighting, followed by MSFT, with a 7.04% weighting, and NVDA, with 6.33%. It has a total of 1,389 holdings.
ESGV has an expense ratio of 0.09%, lower than the category average of 0.36%. It currently has a NAV of $101.68. Its net inflows came in at $769.64 million over the past year.
The fund’s annual dividend of $1.13 yields 1.13% on the current share price. Its four-year average yield is 1.15%. Its dividend payouts have increased at a CAGR of 11.8% over the past three years and 13.2% over the past five years.
ESGV has gained 18.2% year-to-date and 33.6% over the past year to close the last trading session at $100.50.
ESGV’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold and Trade. It is ranked #23 in the same group. To see all the POWR Ratings for ESGV, click here.
ETF #1: iShares ESG Aware MSCI USA ETF (ESGU)
ESGU is an exchange-traded fund launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. It invests in the public equity markets of the United States. The fund includes growth and value stocks of companies of varying market capitalizations that are considered socially conscious and promote environmental responsibility. It seeks to track the performance of the MSCI USA Extended ESG Focus Index using a representative sampling technique.
With $13.27 billion in assets under management, ESGU’s top holding is AAPL, with a 6.43% weighting, followed by NCDA, with a 6.17% weighting, and MSFT, with 6.13%. It has a total of 286 holdings.
ESGU has an expense ratio of 0.15%, lower than the category average of 0.36%. ESGU’s net inflows were $83.37 million over the past month. It currently has a NAV of $126.21.
The ETF pays an annual dividend of $1.45, which yields 1.16% on the current price. It has a four-year average dividend yield of 1.34%. Its dividend payouts have increased at a CAGR of 8.7% over the past three years and 9.6% over the past five years.
ESGU has gained 33.1% over the past year and 19.1% over the past nine months to close the last trading session at $124.97.
ESGU’s POWR Ratings reflect its bright prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
ESGU has an A grade for Buy & Hold and Trade. Within the Large Cap Blend ETFs group, it is ranked #19. To get all of ESGU’s POWR Ratings, click here.
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ESGU shares were trading at $125.09 per share on Wednesday afternoon, up $0.12 (+0.10%). Year-to-date, ESGU has gained 20.34%, versus a 20.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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