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Warning: Do You Know What's in Your ESG ETF?

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  • (0:45) - Understanding ESG ETFs: VEGN
  • (7:05) - ESG ETF Exclusions: SPYX
  • (12:20) - Tech Heavy Holdings and Similar Holdings For ESG ETFs: CRBN & SUSA
  • (17:15) - Episode Roundup: BRKB, AMZN, DIS, JNJ, HD, JPM, FB, GOOGL


Welcome to Episode #209 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is joined by Neena Mishra, Zacks Director of ETF Research, and Zacks expert on ETFs, to discuss some of the niche ESG ETFs.

Recently, there was a Twitter controversy about the US Vegan Climate ETF VEGN because its two largest components in the portfolio are Apple AAPL and Microsoft (MSFT - Free Report) .

How does that make any sense in a Vegan Climate ETF?

Shouldn’t the top stocks be vegan-specific companies?

The ETF invests in companies that have zero animal exploitation and do not destroy the environment.

As Neena points out, this ETF is an “exclusionary” ETF. It excludes companies that don’t fit the criteria.

A couple of examples are companies like Amazon AMZN, because Amazon owns Whole Foods which sells meat.

Exclusionary ESG ETFs

Because there aren’t enough companies that are publicly traded in a certain industry, such as veganism or alternative energy, the ETFs go the other way and invest in companies that DO follow the criteria and exclude those that don’t.

This is how you get so many ESG ETFs owning Apple and Microsoft. Microsoft, for example, has pledged to be carbon negative by 2030.

Also, in the ESGs, they have criteria on each component. In many of the ESG ETFs, Berkshire Hathaway BRK.B is often excluded because it apparently doesn’t meet good reporting standards, which is the “G”, or “governance” in many of these funds.

What else should you know about what your ETF may be holding?

Tune into this week’s podcast to find out.

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