Sustainable ETFs

Sustainable ETFs invest in companies that meet environmental, social and governance criteria – and filter out controversial companies.

The most important labels:

1. ESG (Environment, Social, Governance):

• Moderate filter – excludes the worst ~25%
• Example: iShares MSCI World ESG Enhanced (IE00BG11HV38)
• TER: 0.20%
• Approx. 1,200 instead of 1,500 shares

2. SRI (Socially Responsible Investing):

• Strict filter – only the best ~25% remain
• Example: iShares MSCI World SRI (IE00BYX2JD69)
• TER: 0.20%
• Approx. 400 shares – much more concentrated

3. PAB (Paris-Aligned Benchmark):

• Aligned with the 1.5°C climate target
• Reduces CO2 intensity by 50% vs. the parent index
• Annual decarbonisation of 7%
• No fossil fuels

Performance comparison (5 years, annualised):

• MSCI World: ~10% p.a.
• MSCI World ESG: ~9.8% p.a.
• MSCI World SRI: ~9.5% p.a.
• Difference: under 0.5% – statistically barely relevant

What's excluded?

• ESG: tobacco, controversial weapons, coal
• SRI: additionally: oil/gas, gambling, alcohol, nuclear power, GMOs
• PAB: all fossil fuels, companies with high CO2

Recommendation for beginners:

• Broad diversification matters: prefer the ESG variant (1,200 shares 400)
• Identical for tax purposes in Germany: 30% partial exemption as with normal equity ETFs
• No need to sacrifice returns: the data shows no systematic disadvantage