The best ESG funds of July 2021 – Forbes Advisor

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We started by looking at around 80 ETFs and mutual funds focused on ESG investing. While some investors are willing to sacrifice returns in exchange for ESG-focused investments, we were not. We excluded funds that did not have at least three years of performance data. We also excluded funds that performed significantly below the S&P 500 benchmark or other ESG funds.

Beyond performance, we took into account the costs associated with each fund. The index funds on our list are the cheapest we’ve found and tend to perform better over long periods of time. We have included more expensive actively managed funds, based on their performance after fees. A word of warning should be noted.

Several ESG funds on our list have performed out of the ordinary over one or three years. This performance partly reflects the remarkable appreciation in growth share prices in general. You cannot know the performance of these funds over much longer periods, which is much more important than short-term performance. It is certainly reasonable to believe that rising rates and switching to value stocks could cause many ESG funds to underperform over the next five to ten years.

Finally, we looked at how each fund selects ESG companies and debt. Our goal was not to impose our own value judgments on this selection. Rather, we were looking for a wide variety of ESG methodologies and concentrations (e.g. sustainable energy vs corporate governance).

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