How are sustainability ETFs faring?

As ETF Securities forecasts more exchange traded fund (ETF) launches in the sustainability space, how have existing products fared in this space?

There were currently four products which described themselves as ‘sustainable’, two each from BetaShares and Vanguard.

Over three years to 28 February, 2021, the best-performing fund was BetaShares Global Sustainability Leaders which had returned 78%. These returns were significantly better than those by the global sector average of 33%.

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This was also the best-performing fund over one year with returns of 21% compared to global sector returns of 10%.

Performance of sustainable ETFs over three years to 28 February 2021

The $1.1 billion fund was launched in January 2017 and currently had its largest weighting to information technology at 39% followed by consumer discretionary. Holdings needed to pass “eligibility screens which were designed to exclude companies associated with direct or significant fossil fuels industry or that are engaged in activities deemed inconsistent with responsible investment considerations”.

VanEck Vectors MSCI International Sustainable Equity ETF did not have a three-year track record but had returned 30% since inception and 4% over one year.

The two international funds fared better than the ones focused exclusively on Australia with both Australian-focused sustainable ETFs underperforming the Australian equity sector.

Over three years, the BetaShares Australian Sustainability Leaders ETF returned 23.7% while the VanEck Vectors MSCI Australian Sustainable Equity ETF returned 21.3% versus returns by the Australian equity sector of 23.9%, within FE Analytics’ Australian Core Strategies universe.

The largest weighting in the $836 million BetaShares fund was to healthcare while the largest sector weighting for the VanEck fund was materials followed by financials. The VanEck fund was far smaller in assets under management at just $90 million.

The underperformance was worse on a short-term basis with the BetaShares fund returning just 0.05% over one year to 28 February, 2021, and the VanEck fund returning 1.8%. This compared to double-digit returns of 10.1% by the Australian equity sector.

Performance of sustainable ETFs over one year to 28 February 2021

 




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