Best ESG ETFs: My Top 3 Aussie ESG ETF(s) in 2021 (FAIR vs VETH vs GRNV)

Following on from My Top 3 Global ESG ETFs article, I thought I’d shift the conversation back home and compare some of the Best Aussie ESG ETF(s) (FAIR vs VETH vs GRNV).

In this article, I’ll be unpacking BetaShares Australian Sustainability Leaders ETF (ASX: FAIR), Vanguards Ethically Conscious Australian Shares ETF (ASX: VETH) and VanEcks MSCI Australian Sustainable Equity ETF (ASX: GRNV) to try and sort out the best from the rest. 

Aussie ESG ETF Review Contents

You can click the links below to read about each ETF individually or skip to my two cents. 

If you’re interested in learning more about other ASX listed ETFs that’ll provide you with broader exposure to Australia’s biggest companies, check out this article comparing VAS, A200 and IOZ.

Keen to dig deeper into the basics of ESG investing?

Should you want to familiarise yourself with the concept of ESG investing, check out the first few paragraphs of this article. It’ll get you up to speed with the idea.

Need to level up your ETF game? 

Before I compare FAIR, VETH and GRNV, here’s a link to an investing basics article I wrote about the fundamentals of ETFs in case you needed a brush-up before we get into specific ETF talk.

1. Aussie ESG ETF #1 – Betashares FAIR Review (ASX:FAIR)

BetaShares have consistently been quick to react to today’s megatrends by offering thematic ETFs accordingly. The ESG megatrend was no exception for BetaShares.

Listing in 2017, FAIR was the second of the trio discussed here to provide a domestically focused ESG ETF.

FAIR tracks the returns of the Nasdaq Future Australian Sustainability Leaders Index and is the largest of the three ETFs in terms of fund size.

FAIR is the Aussie ESG ETF with the largest pool of Assets Under Management (AUM)

One thing that stands out about FAIR is its enormous pool of assets under management compared to VETH and GRNV.

FAIR AUM VETH AUMGRNV AUM
$1.16Bn (27/08/2021)$406M (31/07/2021)$82M (26/08/2021)

FAIRs outsized AUM is partly down to Future Super. Future Supers 2020 Annual Report mentions that 30% of their fund is allocated to FAIR, which equates to around $203M.  Interestingly, another 32% of their portfolio was allocated to Betashares international ESG ETF, ETHI. 

FAIR weeds out the worst, and seeks out the best

The cool thing about FAIR is that the folks at Nasdaq have designed a robust positive screen that aims to search for top ESG performers. 

They’ve also implemented a negative screen by excluding companies that don’t meet their ESG standards in the index. 

VETH and GRNV have screening processes of their own, but more on them later.

Here’s what companies are included in FAIR

FAIRs positive screen is based on robust eligibility criteria designed to identify ‘Sustainability Leaders’ for inclusion in the index. To earn your stripes as a sustainability leader, organisations need to satisfy at least one of the following criteria:

  • More than 20% revenue derived from activities like renewable energy, education, healthcare, education and social infrastructure. Full list is available in the PDS. 
  • Recipient of either an “A” or “B” grade (or equivalent) rating from a trusted ethical consumer report (e.g. Ethical Consumer Guide) 
  • Certified B Corporation

Interestingly, not every company included in the index needs to be classified as a sustainability leader, however, they are given preference in the index. 

A company may also be eligible for inclusion if it’s identified as an “additional renewable energy security” (earns greater than 50% of revenue from renewable energy or activities that significantly minimise greenhouse gas emissions) by the Responsible Investment Committee.

FAIRs Responsible Investment Committee adds a 3rd layer of screening

The responsible investment committee (appointed by BetaShares) determines the list of securities that pass the responsible investment screens as detailed in Nasdaq’s screening methodology. 

As it turns out the responsible investment committee (RIC) has a fair bit of pull when it comes to making investment decisions. The FAIR PDS stipulates that the committee can exclude companies “engaged in other activities deemed inconsistent with responsible investment considerations”

The power of the RIC can add another layer of rigour to FAIRs screening process. The only problem I see is that it’s not clear what companies the RIC have included or excluded over and above the Nasdaq screening methodology.

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Companies not included in FAIR

FAIR does not include companies that generate any, or a capped percentage of revenue from the following activities 👇

  • Fossil fuels (direct and indirect)
  • Uranium and Nuclear Energy, 
  • Alcohol, 
  • Tobacco, 
  • Gambling, 
  • Armaments and Militarism
  • Destruction of Valuable Environments
  • Animal Cruelty,
  • Chemicals of Concern
  • Mandatory Detention of Asylum Seekers
  • Junk Foods
  • Human Rights
  • Board Diversity
  • Payday Lending, 
  • Adult entertainment and
  • FAIR also excludes any company with any severe ESG-related reputational risk or controversy.

FAIR Key Facts 👇

Use the table below to grab all the key facts about FAIR you need to get comfortable with it!

As of July 31 2021FAIR
ETF IssuerBetaShares
Management Fee (Incl operational costs)0.49% P.A
Benchmark IndexNasdaq Future Australian Sustainability Leaders Index
Dividend Reinvestment PlanYes
Dividend Yield 3.1%
Income Distribution FrequencySemi-Annually
3Yr Return10.41%*
Return Since Inception (2017)10.54%*
Funds Under Management (FUM)$1.2Bn
Number of Holdings (ETF)78
Weighting MethodologyMarket Cap, Individual Holdings Capped at 4%.
Minimum Market Cap100M
Listed Since2017
Top 10 Holdings (highest to lowest concentration)Resmed Inc, Telstra Corp, Goodman Group, Sonic Healthcare, Xero, Cochlear, Brambles, Suncorp Group, CSL & Fisher & Paykel HealthCare
Top 10 Holding Concentration40.4% of the total ETF holdings

*After fees, dividends re-invested. 

Want to know more about FAIR?

You can check out the latest FAIR  fact sheet  If you’re keen on doing some general reading. Alternatively, FAIRs PDS will give you all the nitty gritty detail you’ll need to make an informed decision. 

2. Aussie ESG ETF #2 – Vanguard VETH Review (ASX:VETH)

Vanguard’s Ethically Conscious Australian Shares ETF (ASX: VETH) was listed in 2020 and sets out to track the return of the FTSE Australia 300 Choice Index. 

In a nutshell, VETH applies a negative screen on the 300 companies comprising the ASX300 index. By doing so, VETH holds 252 companies and excludes the 48 that didn’t pass the negative screen.

Because VETH excludes 48 ASX 300 companies with significant involvement in non-ESG activities, you can expect it to behave similarly to the base index. In fact, VETH has almost performed identically to VAS (tracks the ASX300) over the past 6 months.

VETH Is Cheapest Aussie ESG ETF 

VETH boasts an MER of just 0.17% P.A. Compared to FAIR and GRNV, with MERs of 0.49% and 0.38% respectively, VETH is easily the cheapest option.

$100,000 invested in VETH would cost you

  • $170 for every $100,000 invested in VETH;
  • $380 for every $100,000 invested in GRNV and;
  • $490 for every $100,000 invested in FAIR.

These fees are excluding bid/ask spread fees. 

Here’s what companies are included in VETH

With VETHs low MER in mind, it shouldn’t be a surprise that VETH does not have a positive screen applied to it. That means companies like Australia’s “Big 4 Banks” are all included in the ETFs top 10 holdings. By contrast, FAIR doesn’t hold any of the “Big 4”, and GRNV only owns ANZ Bank.

From my reading, it seems FAIR and GRNV are keeping away from certain banks because of concerns around their lending to fossil fuel projects.

This becomes clear when observing the sector exposure of each ETF. VETH is most heavily weighted to the financial sector (35.1%).  FAIR and GRNV on the other hand have a 17.1%, and 15.1% weighting towards the financial sector. 

Companies not included in VETH

VETHs negative screen excludes companies with significant business involvement in the following activities:

  • Fossil fuels, 
  • Nuclear power, 
  • Alcohol, 
  • Tobacco, 
  • Gambling, 
  • Weapons, 
  • Adult entertainment and
  • VETH also conducts a related screen for companies involved in severe controversies.

VETH Key Facts 👇

Use the table below to grab all the key facts about VETH you need to get comfortable with it!

As of July 31 2021VETH
ETF IssuerVanguard
Management Fee (Incl operational costs)0.17% P.A.
Benchmark IndexFTSE Australia 300 Choice Index
Dividend Reinvestment PlanYes
Dividend Yield2.6%
Income Distribution FrequencyQuarterly
6 Month Return13.5%*
Return Since Inception20.77%*
Funds Under Management (FUM)$406m
Number of Holdings (ETF)252
Weighting MethodologyMarket Cap Weighted
Minimum Market CapNot available. 
Listed Since2020
Top Ten Holdings (Highest to lowest concentration)Commonwealth Bank, CSL, Westpac Bank, National Australia Bank, ANZ Bank, Wesfarmers, Fortescue Metals Group, Macquarie Group, Telstra Group & Goodman Group
Top Ten Holding Concentration48.3% of the total ETF holdings.

*After fees, dividends re-invested. 

Want to know more about VETH?

The VETH  fact sheet is a great place to start.  You could also browse VETHs PDS and the FTSE index methodology for more detail.

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3. Aussie ESG ETF #3 – VanEck GRNV ETF Review (ASX:GRNV)

GRNV was launched in 2016 and aims to track the performance of the MSCI Australia IMI Select SRI Screened Index. By doing so, investors can expect GRNV to offer a diversified portfolio of ESG friendly Aussie companies.

GRNV is the middle ground between FAIR & VETH from a fee perspective. That said, GRNV does have a comprehensive positive and negative screen applied to it, so it’s closer to FAIR in terms of stringency. 

For example, Unlike FAIR, both GRNV and VETH have no negative screen on companies involved in payday lending or companies lacking gender diversity on their board. GRNV’s positive screen does consider companies with board diversity, however, said companies are not included entirely on that basis.

GRNV & VETH are the best Aussie ESG ETFs for consistent dividends

For investors with an income focus, FAIR, GRNV and VETH all offer generous dividend yields north of 2.5%.

GRNV and VETH offer the added bonus of paying out their dividends quarterly, whereas FAIRs dividend is paid twice per year.

This might be something to consider if you’re planning to rely on dividend payments as an income source. 

Here’s what companies are included in GRNV

Similarly to FAIR, GRNV has a positive screen applied to it. The predominant difference between the two positive screens is research the data applied to GRNV is compiled from MSCI, and not Nasdaq.

That means the positive screening frameworks between FAIR and GRNV aren’t exactly alike. 

Here’s how the GRNV postive screen works

MSCI’s ESG Ratings Methodology mentions that “companies are rated on an AAA-CCC scale relative to the standards and performance of their industry peers”. GRNV’s positive screen mandates it to only include companies with ESG ratings of either ‘A’, ‘AA’ and ‘AAA’. 

Ratings are formed by assessing companies against 35 ESG Key Issues. These range from issues associated with business ethics to carbon emissions. 

The methodology is designed to assess a company’s core business while also taking a bigger picture view of the industry’s issues that can impact the company.

Companies not included in GRNV

GRNV doesn’t include companies that generate any, or a capped percentage of revenue from the following activities 👇

  • Adult Entertainment
  • Alcohol
  • Animal Welfare
  • Civilian Firearms
  • Controversial Weapons
  • Conventional Weapons
  • Fossil Fuels
  • Gambling
  • Genetically Modified Organisms (GMO)
  • Nuclear Power
  • Nuclear Weapons
  • Tobacco
  • Nutrition and Health
  • “Soft Drinks” sub-industry as per GICS.
  • Companies reported by MSCI as having red or orange ESG controversies based on MSCI methodology.
  • Companies reported by MSCI as having red or orange ESG controversies based on MSCI methodology.

GRNV Key Facts 👇

Use the table below to grab all the key facts about GRNV you need to get comfortable with it!

As of 31 July 2021.GRNV
ETF IssuerVanEck
Management Fee (Incl operational costs)0.38% P.A.
Benchmark IndexMSCI Australia IMI Select SRI Screened Index
Dividend Reinvestment PlanYes
Dividend Yield 3.2%
Income Distribution FrequencyQuarterly
3Yr Return10.08%
Return Since Inception7.38%
Funds Under Management (FUM)$63.8M
Number of Holdings (ETF)94
Weighting MethodologyMarket Cap, Individual Holdings Capped at 5%.
Minimum Market Cap750M
Listed Since2016
Top Ten HoldingsTelstra Corp, Goodman Group, Fortescue Metals Group, CSL, ANZ Bank, Transurban Group, Newcrest Mining, Sydney Airport, Afterpay & Xero.
Top Ten Holding Concentration40.54% of the total ETF holdings.

*After fees, dividends re-invested. 

Want to know more about GRNV?

Check out the GRNV fact sheet for a high-level overview. GRNV’s PDS and MSCI’s ESG methodology for all the detail you could ever need.

Jesse’s 2 Cents

To sum up, FAIR, VETH and GRNV all share the broad objective of providing investors with an Australian Shares ESG ETF. Interestingly, the trio are doing it in very different ways.

I think the best way to think about comparing FAIR, VETH and GRNV is by analogising the business model of a software company. 

The Basic Aussie ESG ETF

VETH is like the ‘free’ or ‘basic’ version. It’ll give you the basics like a simple negative screen for next to nothing. For investors seeking to simply avoid companies heavily involved in the traditional non-ESG industries like fossil fuels and tobacco without the added cost of a positive screen, VETH seems like the best option. 

The Standard Aussie ESG ETF

At an additional cost, you can own GRNV. GRNV is equivalent to the ‘standard’ or middle of the range version. GRNV comes with some added features like a positive screen for investors who want to take their ESG investing a little more seriously.

To me, GRNV looks like a great option for investors conscious of cost, but still wanting a little extra in terms of screening.

The Pro Aussie ESG ETF

Lastly, investors can go for the most expensive ‘pro’ version that comes with all the bells and whistles. FAIR is a hard-core ESG investors dream. It has a comprehensive negative, and positive screen applied to it, ample liquidity and an investment committee that can make active investment decisions. Unsurprisingly, all of that comes at a cost.

FAIRs outsized AUM would suggest what most investors are looking to gain from owning an ESG focussed ETF.

What is the Best Aussie ESG ETF For You?

The Ausse ESG ETF you choose will largely depend on how highly you prioritise owning Australia’s most ESG friendly companies. One of VETH, GRNV, or FAIR should give you exactly what you’re after, no matter how seriously you take your ESG investing.

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Disclaimer: This website (“The Money Pal”) is published and provided for informational and entertainment purposes only. The information in the Blog constitutes the Content Creator’s own opinions and it should not be regarded as financial advice.

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