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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - All Cap Growth category of the market, the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) is a smart beta exchange traded fund launched on 12/01/2016.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Because the fund has amassed over $18.31 billion, this makes it one of the largest ETFs in the Style Box - All Cap Growth. ESGU is managed by Blackrock. Before fees and expenses, this particular fund seeks to match the performance of the MSCI USA ESG Focus Index.

The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for ESGU are 0.15%, which makes it one of the least expensive products in the space.

ESGU's 12-month trailing dividend yield is 0.91%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

ESGU's heaviest allocation is in the Information Technology sector, which is about 40.5% of the portfolio. Its Financials and Healthcare round out the top three.

Taking into account individual holdings, Nvidia (NVDA) accounts for about 7.83% of the fund's total assets, followed by Apple (AAPL) and Microsoft (MSFT).

ESGU's top 10 holdings account for about 36.69% of its total assets under management.

Performance and Risk

So far this year, ESGU has added about 15.28%, and is up roughly 17.2% in the last one year (as of 10/07/2026). During this past 52-week period, the fund has traded between $137.39 and $170.65.

The fund has a beta of 1.03 and standard deviation of 15.02% for the trailing three-year period. With about 273 holdings, it effectively diversifies company-specific risk .

Alternatives

iShares ESG Aware MSCI USA ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

iShares ESG Aware MSCI EAFE ETF (ESGD) tracks MSCI EAFE ESG Focus Index and the Vanguard ESG U.S. Stock ETF Shares (ESGV) tracks FTSE US ALL CAP CHOICE INDEX. iShares ESG Aware MSCI EAFE ETF has $11.93 billion in assets, Vanguard ESG U.S. Stock ETF Shares has $13.76 billion. ESGD has an expense ratio of 0.20% and ESGV changes 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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