Investors are aligning their portfolios with their values, entering ESG investing. ESG (Environmental, Social, and Governance) ETFs enable you to invest in companies that prioritize sustainability, ethical operations, and robust governance, without compromising performance.
If you’re looking to build long-term wealth while making a positive impact, these Top 5 ESG ETFs to Buy and Hold should be on your radar.
Let’s explore the best options for long-term, values-aligned growth.
What Is an ESG ETF?
ESG ETFs are exchange-traded funds that hold a diversified portfolio of companies selected based on ESG criteria. These ETFs filter out companies that may harm the environment, exploit labor, or lack transparency in governance.
Benefits of ESG ETFs:
- Long-term growth potential
- Diversification
- Social and environmental alignment
- Often lower volatility than traditional sectors like energy
Top 5 ESG ETFs to Buy and Hold
1. iShares ESG Aware MSCI USA ETF (ESGU)
- Ticker: ESGU
- Expense Ratio: 0.15%
- AUM: Over $28 billion
- Dividend Yield: ~1.35%
- Top Holdings: Apple, Microsoft, Amazon
Why Buy:
ESGU is one of the most diversified and popular ESG ETFs. It covers large and mid-cap U.S. stocks that pass ESG screening. With low costs and strong performance, it’s ideal for long-term investors.
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2. Vanguard ESG U.S. Stock ETF (ESGV)
- Ticker: ESGV
- Expense Ratio: 0.09%
- AUM: ~$8 billion
- Dividend Yield: ~1.3%
- Top Holdings: Tesla, Nvidia, Alphabet
Why Buy:
A low-cost alternative from Vanguard, ESGV offers exposure to over 1,500 companies with a solid ESG profile. With its broad market coverage, this ETF is a core holding for ESG investors.
Great for: Passive investors seeking a simple, long-term ESG solution.
3. iShares Global Clean Energy ETF (ICLN)
- Ticker: ICLN
- Expense Ratio: 0.41%
- AUM: ~$5 billion
- Dividend Yield: ~1.5%
- Top Holdings: Enphase Energy, Vestas Wind Systems, First Solar
Why Buy:
This ETF targets companies in the clean energy sector, including wind, solar, and hydroelectric. It’s a focused bet on the transition to renewable energy.
Note: It’s more volatile than others on this list but with higher potential upside.
Learn more from IEA’s Clean Energy Market Outlook
4. SPDR S&P 500 ESG ETF (EFIV)
- Ticker: EFIV
- Expense Ratio: 0.10%
- AUM: ~$2 billion
- Dividend Yield: ~1.4%
- Top Holdings: Microsoft, Nvidia, Home Depot
Why Buy:
EFIV offers an ESG-optimized version of the S&P 500. You get market-matching returns with ESG filtering, making it an excellent choice for buy-and-hold investors.
Strategy Tip: Pair EFIV with a bond ETF to create a balanced ESG portfolio.
5. Invesco ESG NASDAQ 100 ETF (QQMG)
- Ticker: QQMG
- Expense Ratio: 0.20%
- AUM: ~$700 million
- Dividend Yield: ~0.5%
- Top Holdings: Meta, Apple, Nvidia
Why Buy:
QQMG tracks an ESG-screened version of the Nasdaq 100, making it ideal for tech-forward ESG investors. You’ll gain exposure to innovation while sticking to sustainability.
Best For: Tech enthusiasts who want ESG alignment without giving up growth.
How to Choose the Best ESG ETF for You
When choosing an ESG ETF, consider:
- Expense Ratio – lower fees mean better returns over time
- Holdings – are you aligned with the companies included?
- AUM and Liquidity – larger funds typically have lower spreads
- Dividend Yield – helpful for income-oriented investors
- Tracking Index – S&P, MSCI, Nasdaq, etc.
Tax Considerations & Reinvestment Strategy
Like any ETF, dividends from ESG ETFs can be reinvested using a DRIP (Dividend Reinvestment Plan), accelerating your compounding growth.
Related: The Power of Compound Interest
Risks of ESG Investing
While ESG ETFs offer long-term benefits, they come with trade-offs:
- Performance Bias: Avoiding entire sectors (e.g., fossil fuels) may reduce returns in certain market cycles.
- Greenwashing Risks: Some funds may appear ESG-compliant without rigorous standards.
- Higher Volatility: Sector-focused funds like ICLN can be more volatile.
Final Thoughts
If you’re serious about sustainable investing, these five ESG ETFs offer strong long-term growth potential while letting you support ethical business practices.
For many investors, combining a core holding like ESGU or ESGV with thematic options like ICLN is a smart way to balance impact and return.
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