Although ESG funds have taken their share of criticism from some political circles in 2024, investments that screen for environmental, social and governance issues remain popular with mainstream investors.
If you’re looking for ESG funds to round out your portfolio as we enter the final stretch of the year. Forbes Advisor has created a list of what it considers the eight best ESG investments of 2024.
The publication came up with the picks by screening Morningstar data to weed out funds that required minimum investments of more than $5,000, did not lend themselves to a well-diversified portfolio, had fees in excess of 0.6% or were narrowly focused by sector, geography or age-targeting.
From the pared down list of 18 funds, Forbes chose the eight that were the most broadly diversified and thus suitable for the widest possible group of investors. Here are their top ESG fund picks for 2024:
- Vanguard ESG U.S. Stock ETF ESGV
- Pimco Enhanced Short Maturity Active ESG ETF EMNT
- Nuveen ESG Dividend ETF NUDV
- iShares MSCI Sustainable Developmental Goals ETF SDG
- Fidelity U.S. Sustainability Index Fund
- Fidelity International Sustainability Index Fund
- Calvert U.S. Mid Cap Core Responsible Index Fund
- BlackRock Sustainable Advantage CoreAlpha Bond Fund
Choosing an ESG fund
The Forbes Advisor editors provided these tips for investors doing their own due diligence to help them find ESG funds that align with their investment goals and values:
- Define your ESG focus. Are you primarily focused on environmental issues? Are positive social outcomes your greatest concern? Clarifying your objectives will help you narrow your ESG focus.
- Research ESG fund strategies. Funds employ a range of strategies for accomplishing their ESG missions. Some may prioritize positive screening, actively selecting companies with strong ESG performance. Others may emphasize negative screening to exclude companies involved in controversial industries.
- Understand ESG criteria. There is no universal standard governing all ESG criteria, so it’s important to understand what metrics your target funds are employing. Look for transparency and whether managers consider robust, reliable data sources.
- Evaluate the fund’s track record. Sustained, positive investment returns are still a focus for ESG investors. Review the fund’s historical performance—just keep in mind that past performance is not indicative of future results.
- Consider fees and costs. ESG funds are known for having higher expense ratios than other types of funds. Compare the fees associated with your fund to ensure you’re minimizing your costs. Higher fees can erode your returns over time.
- Seek out independent ratings and certifications. Consider independent ratings and certifications provided by organizations such as Morningstar, MSCI, or the United Nations-supported Principles for Responsible Investment (PRI). These ratings can provide additional insights into a fund’s ESG credentials and commitment to sustainable investing.
“It’s essential to conduct thorough research and due diligence to choose an ESG fund that aligns with your values, investment objectives and risk tolerance. If you’re unsure about selecting an ESG fund or need personalized guidance, talk to a financial advisor who can help you navigate the available options based on your specific needs.” the editors wrote.
