Several ETFs cater to ESG investors.

Investors and businesses around the world are expressing growing concerns over social issues such as climate change or diversity in the workplace. And while Wall Street is chiefly concerned with profits, many executives understand that harming the environment or discriminating against certain customers is bad for business. Many public corporations are now focused on ESG issues – that is, environmental, social and governance characteristics. Meanwhile, some index providers have begun to rank companies based on how ethically they operate, and there are accessible and affordable exchange-traded funds for people who want to invest without sacrificing their principles. Here are seven ESG-focused ETFs that allow you to invest in a socially responsible way.

Next:iShares MSCI KLD 400 Social ETF (ticker: DSI) Credit

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iShares MSCI KLD 400 Social ETF (ticker: DSI)

At $1.4 billion in assets, this iShares fund is not just one of the most popular socially responsible investment plays, but is also a substantial fund across all categories with serious size and volume. Benchmarked to an index of about 400 large U.S. companies that include Microsoft Corp. (MSFT) and Facebook (FB), this fund is designed to include only companies that post above-average ratings for environmental, social and governance characteristics. This fund is pretty biased toward technology stocks; roughly 40% of holdings are either in information tech or communications. That may be good or bad, depending on your personal goals, but is worth noting.

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Several ETFs cater to ESG investors.

Investors and businesses around the world are expressing growing concerns over social issues such as climate change or diversity in the workplace. And while Wall Street is chiefly concerned with profits, many executives understand that harming the environment or discriminating against certain customers is bad for business. Many public corporations are now focused on ESG issues – that is, environmental, social and governance characteristics. Meanwhile, some index providers have begun to rank companies based on how ethically they operate, and there are accessible and affordable exchange-traded funds for people who want to invest without sacrificing their principles. Here are seven ESG-focused ETFs that allow you to invest in a socially responsible way.

iShares MSCI KLD 400 Social ETF (ticker: DSI)

At $1.4 billion in assets, this iShares fund is not just one of the most popular socially responsible investment plays, but is also a substantial fund across all categories with serious size and volume. Benchmarked to an index of about 400 large U.S. companies that include Microsoft Corp. (MSFT) and Facebook (FB), this fund is designed to include only companies that post above-average ratings for environmental, social and governance characteristics. This fund is pretty biased toward technology stocks; roughly 40% of holdings are either in information tech or communications. That may be good or bad, depending on your personal goals, but is worth noting.

Vanguard ESG U.S. Stock ETF (ESGV)

Though smaller in size than DSI with about $400 million in total assets under management, this Vanguard ESG fund is tied to a much larger group of holdings with some 1,500 total components. It has a similar focus to the prior fund as it includes U.S. companies with above-average ESG ratings, however it includes a bunch of smaller names given the depth of the lineup of stocks. That may be an appeal for some investors, since top holdings remain old favorites like Apple (AAPL), but farther down the list there are a host of relatively unknown stocks across all sectors of the American economy.

iShares ESG MSCI EAFE ETF (ESGD)

This is another ESG-focused fund, but excludes companies in the U.S. and Canada to take a more global approach to this investing strategy. The result is a diverse group of companies across geographies and sectors, including Swiss consumer giant Nestle (NSRGY) and Japanese automaker Toyota Motor Corp. (TM). Investors should know that some companies in regions like Europe are even more progressive in their environmental, social and corporate governance efforts given greater regulation. For instance, in 2017 the U.K. enacted legislation that requires any business over 250 employees to publicly report its gender pay gap.

SPDR SSGA Gender Diversity Index ETF (SHE)

Perhaps best known for its 2016 debut that featured the "Fearless Girl" statue of a ponytailed tyke staring down Wall Street's famous bronze bull, this ETF's focus is on companies that feature better-than-average female representation on their executive committee. This doesn't mean a perfect balance of men and women, however. Top position Johnson & Johnson (JNJ) has only four women on its leadership team of 12 people, for instance. That ratio is better than its peers, however, and as representation of women continues to improve then so will the gender diversity of constituent stocks in this ETF.

Invesco Solar ETF (TAN)

With more than a decade of trading history, this solar energy ETF is among the oldest options for individual investors looking to invest in a more socially responsible way. With top stocks in this narrow subsector such as First Solar (FSLR) and SolarEdge Technologies (SEDG), TAN is a great way to gain exposure to the solar energy trend without going all-in on a single company. Of course, a laser focus on a group of 23 specialized companies with basically the same business model is not without its risks. Solar sales are prone to volatility from year to year, and so is this ETF.

SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)

If you care about going green but want a broader range in your portfolio beyond renewable energy stocks, the SPDR S&P 500 Fossil Fuel Reserves Free ETF is a good option. SPYX simply takes all the oil, gas and fossil fuel companies out of the popular S&P 500 index list of stocks. That leaves the ESG investor with about 460 stocks that make up a typical index fund, save for the exclusion of energy giants like Exxon Mobil Corp. (XOM). It's an interesting approach that incorporates a more diverse group of companies.

SPDR MSCI ACWI Low Carbon Target ETF (LOWC)

Splitting the difference is LOWC, a fund that more actively targets companies that prioritize energy efficiency and a lower carbon footprint through their normal operations. This means excluding fossil fuel companies again, but also cutting out companies that don't think green in their day-to-day routine. Interestingly, however, this fund contains many more components, with more than 1,000 holdings. This reflects its all-country world index strategy. The result is a diverse group of companies that share a focus on environmentally responsible operations.

Socially responsible ETFs to buy.

iShares MSCI KLD 400 Social ETF (DSI)Vanguard ESG U.S. Stock ETF (ESGV)iShares ESG MSCI EAFE ETF (ESGD)SPDR SSGA Gender Diversity Index ETF (SHE)Invesco Solar ETF (TAN)SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)SPDR MSCI ACWI Low Carbon Target ETF (LOWC)1 of 10

Jeff Reeves, Contributor

A veteran journalist with extensive capital markets experience, Jeff Reeves began writing for ...  Read more

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