For most investors from newbie retail traders to the most experienced stock market veterans trading on the share market is all about trying to build your wealth. There are myriad reasons why you might decide to buy a certain stock, but you do not need to throw your values out of the window to still invest wisely. In fact, there is a growing market for ethical investing, including a focus on the environmental, social and corporate governance (ESG) policies of listed companies.
The good news is that exchange-traded funds (ETFs) have made it very easy for you to invest in companies that align with your ethical values. There are ETFs dedicated to renewable energy, anti-weapons investing, greater diversity of boards of directors, electric vehicles, and fighting environmental degradation the list is nearly endless. The only challenge is picking which ETFs match your own views and then deciding whether you believe they will continue to grow over time. To help get you started, we explore below how to choose an ETF and some interesting ESG ETFs to watch for in Q3 2022.
How to find the best ESG ETFs
Sustainable ETFs are no longer afterthought funds that fail to garner any real interest from investors. On the contrary, many ethical ETFs are a force to be reckoned with.
Generally, investing in ETFs is different from investing in certain stocks because they are more of a long-term decision. While like all investments there is the risk of their share price becoming volatile, ETFs are generally steadier than small- to mid-cap stocks, and investors choose them for their durability, diversity and growth potential over the long term, rather than as short-term trading picks.
So how exactly do you find the right ETF for you? And how can you ensure that the companies within that ETF have the environmental, social or corporate governance values that align with your own views? It takes research and due diligence, but we can help you get started on your ESG ETF journey right now. Here are five ethical ETFs that we think are worth monitoring in Q3 2022.
5 ESG ETFs to consider now
In this guide, we will highlight five interesting ESG ETFs to watch in Q3 2022. The ETFs are:
iShares PHLX Semiconductor
VanEck Vectors Semiconductor
Materials Select Sector SDPR
ARK Innovation
Invesco Solar
iShares PHLX Semiconductor ETF (SOXX)
Past performance is not an indication of future results
- iShares PHLX Semiconductor ETF tracks a modified market cap-weighted index of 30 different US-listed semiconductor companies, including those involved in the design, manufacture and distribution procedures of semiconductors.
- To be eligible for this fund, companies must meet strict requirements surrounding liquidity and investment quality, including a minimum market cap of $100 million.
- The ETF uses market cap-weighting with a capping technology. That means that the top five securities are capped at 8%, with the remainder capped at 4%.
- The sampling strategy used to track the PHLX Semiconductor Sector Index is reconstituted every year and rebalanced quarterly.
- Offering exposure to 30 firms in the semiconductor space, the fund has amassed $6.52 billion in its asset base and trades, on average, in a quarterly volume of 1.5 million shares.
- This fund is non-diversified, so make sure you are aware of both the benefits and risks of investing in a non-diversified ETF.
- As of early June, 2022, the iShares stock was valued at $421.74.
Your capital is at risk. Other fees apply.
VanEck Vectors Semiconductor ETF (SMH)
Past performance is not an indication of future results
- The VanEck Vectors Semiconductor ETF tracks a market cap-weighted index of 25 of the largest semiconductor companies listed in the US.
- Established in 2011, the fund gives investors exposure to 25 securities via the MVIS US Listed Semiconductor 25 Index.
- If you are looking for a diversified ETF, this may not be for you. The fund is highly concentrated and invests in common stocks and depositary receipts of semiconductor companies.
- In order to be eligible for the fund, companies must prove that 50% of their revenue comes primarily from producing semiconductors and semiconductor equipment.
- Product managed assets within the fund are worth approximately $5.42 billion and the fund trades a quarterly average volume of 4.6 million shares.
- VanEck Vectors Semiconductor ETF shares reached an all-time high of more than $316 at the end of December 2021, but, with a drop-off continuing into 2022, new investors may jump at an entry price that is potentially undervalued.
Your capital is at risk. Other fees apply.
Materials Select Sector SPDR ETF (XLB)
Past performance is not an indication of future results
- The Materials Select Sector SPDR ETF tracks the returns of the Materials Select Sector Index, which encompasses all of the S&P 500 component companies included in the materials sector.
- Companies within the fund are active in the discovery, development and processing of raw materials, working across chemical, construction materials, containers and packaging, metals and mining, and paper and forest products industries.
- The fund tracks a market cap-weighted index of US basic materials companies, focusing exclusively on the materials component of the S&P 500.
- Like other ETFs on this list, this fund is heavily concentrated on large-cap companies from a specific sector, which should be a major consideration before making an investment.
- One of the selling points of this ETF is that it allows investors to take up a more strategic position and at a targeted level as compared to traditional investment options.
- The fund has an MSCI ESG Fund Quality Score ranked in the top 20% against other funds in the same peer group.
- The ETF peaked above $90 in December 2021, representing a yearly increase in price of 26.7%. The share price as of ealy June, 2022 was $87.49.
Your capital is at risk. Other fees apply.
ARK Innovation ETF (ARKK)
Past performance is not an indication of future results
- ARK Innovation ETF (ARKK) is part of CEO Cathie Woods suite of innovative, high-flying funds and is arguably its flagship ETF.
- The fund is made up of various disruptive companies that develop new products or services. These are mainly in the areas of DNA technologies, industrial innovations, fintech innovations and next-generation Internet.
- In December 2020, ARK Innovation became the largest actively managed ETF.
- ARKK is focused on accruing long-term capital growth through its domestic and foreign equities securities investments, with major holdings such as Tesla, Intellia Therapeutics, Sea Ltd. and Square.
- With exposure to a range of sectors, but particularly healthcare and IT assets, it is a popular choice among investors who want to diversify their portfolios.
- From its low of $14.76 per share in February 2016, the fund has seen consistent growth, peaking above $156 in February 2021. The share price was $43.49 as of June 6, 2022.
- Despite dropping more than 70% of its value since its 2021 peak, its underlying holdings still have a positive outlook over the long term. Bullish investors could get value at the current price, with the ETF still holding strong tech names that will potentially outperform in the near future.
Your capital is at risk. Other fees apply.
Invesco Solar ETF (TAN)
Past performance is not an indication of future results
- As its name suggests, the Invesco Solar ETF is heavily focused on the solar industry, and is made up of various companies within the solar energy sector.
- The exchange-traded fund was established in 2008 and is based on the MAC Global Solar Energy Index (GSEI).
- The Invesco Solar ETF guarantees at least 90% of its total assets will be invested in MAC GSEIs securities, American depositary receipts (ADRs) and global depositary receipts (GDRs).
- The fund is diversified across technologies, geographies and the value chain, with its solar holdings fairly evenly split across North America and Asia, with a not insignificant exposure to Europe as well.
- Solar appears to have a long runway for future growth in the coming decades, which may interest investors looking for a long-term ETF to hold for several years or decades.
- After peaking above $120 per share at the beginning of 2021, the ETF experienced some pullback throughout the year and into 2022, providing investors with a more attractive entry point.
- A challenging start to 2022 has seen the price turn around, with investors hopeful of a steady rise throughout 2022 to counter the 2021 drop-off. The share price was $79.79 as of early June, 2022.
Your capital is at risk. Other fees apply.
Charts sourced from TBanque platform 20/06/2022. All trading carries risk. Only risk capital you can afford to lose.
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