Table of Contents
Table of Contents

A Look at One of the Largest Sustainable Investing ETFs

By
Todd Shriber
Full Bio
Todd Shriber is the ETF editor at Benzinga. An ETF expert, he has been quoted by Barron's, CNBC.com, and The Wall Street Journal. Todd has a bachelor's degree in broadcast journalism from Texas Christian University.
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Updated December 17, 2023
Reviewed by
Charlene Rhinehart
Charlene Rhinehart
Reviewed by Charlene Rhinehart
Full Bio

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Learn about our Financial Review Board
Fact checked by Jiwon Ma
Part of the Series
Types of ETFs Explained
What's an ETF
  1. Exchange-Traded Fund (ETF) Types and Benefits Explained
  2. 6 Common ETF Types for Your Portfolio
  3. An Inside Look at ETF Construction
  4. Custom Basket ETFs
  5. Single-Stock ETF Definition
  6. Passive ETF: What It Means, How It Works
  7. Actively Managed ETF: Meaning, Overview, Limitations
Types and Details
  1. Index ETF: Definition, Types, Advantages, and Risks
  2. Smart Beta ETF: Definition, Types, Example
  3. Diamonds ETF: Meaning, Popularity, Statistics
  4. No-Fee ETF: What It Means, History, Criticism
  5. Dividend ETF: What it Means, How it Works
  6. Value vs. Growth ETFs: How Do You Choose?
  7. Benefits and Risks of Thematic ETFs
  8. Factor ETFs: Meaning, Effectiveness, Examples
  9. Benefits of a Covered Call ETF
  10. Leveraged ETFs: The Potential for Bigger Gains—and Bigger Losses
  11. Ultra ETF: What It Means, Benefits, Limitations
Equity Funds
  1. ETFs For Sector Rotation Strategies
  2. What Is a Sector ETF, How Do You Invest in One?
  3. Services Sector ETF: Meaning, Examples, Pros and Cons
  4. Airline Industry ETF
  5. Auto Industry ETF: What It is, How It Works, Example
  6. What Common ETFs Track the Banking Sector?
  7. Which Leveraged ETFs Track the Banking Sector?
  8. Biotechnology ETF: What It Is and How To Invest
  9. Communication Industry ETF Definition
  10. Food Industry ETF: What It is, How it Works, Pandemic Impact
  11. Gaming Industry ETF: What It is, How It Works, Examples
  12. Insurance Industry ETF: Meaning, Example, Pros and Cons
  13. Retail Industry ETF: What It is, How It Works
Real Estate and Specialty ETFs
  1. A Look at One of the Largest Sustainable Investing ETFs
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  2. ETFs for the Driverless Car Revolution
  3. Emerging Market ETF: Meaning, Pros and Cons
  4. The Vegan ETF - All About How the VEGN Fund Works
  5. REIT ETF: What it is, How it Works, Special Considerations
Currency Funds
  1. Currency ETF: Meaning, Special Considerations, Examples
  2. How Currency-Hedged ETFs Work
Inverse ETFs
  1. Inverse ETF: Definition, Comparison to Short Selling, and Example
  2. Inverse ETFs Can Lift a Falling Portfolio
  3. The Risks of Investing in Inverse ETFs

"Sustainability" and "sustainable investing" are among the latest buzzwords in the exchange-traded funds (ETFs) industry. These funds cater to people who want to be certain that their money is invested in companies that are committed to environmental, social, and governance awareness. The sentiment has spawned its own acronym, ESG.

One of the biggest socially conscious ETFs is the iShares MSCi KLD 400 Social ETF (DSI), with $3.9 billion in assets under management as of December 2023.

Key Takeaways

  • ESG ETF is the unwieldy acronym for exchange-traded funds that invest in companies that operate responsibly in regard to environmental, social, and governance issues.
  • They avoid the stocks of companies that are polluters or exploiters.
  • As of July 2023, the three largest ESG ETFs included iShares MSCI USA SRI UCITS ETF (SUAS), iShares MSCI USA ESG Enhanced UCITS ETF (EEDS), and SPDR Bloomberg SASB US Corporate ESG UCITS ETF (SPPU).

Understanding DSI

DSI's investment objective is as follows: "The iShares MSCI KLD 400 Social ETF seeks to track the investment results of an index composed of U.S. companies that have positive environmental, social and governance characteristics as identified by the index provider."

The fund's investment objective involves aligning with an index that employs specific criteria to screen out certain types of businesses. These businesses may include but aren't necessarily limited to adult entertainment, alcohol, civilian firearms, fossil fuel extraction, gambling, nuclear power, or tobacco. An important factor to be considered with DSI, or any sustainable fund for that matter, is that the companies and industries they exclude are as important as those they include.

Even with all those exclusions, DSI invests in 401 stocks and provides exposure to 12 industry sectors. Not surprisingly, the energy, materials, and utilities sectors have historically had the small weight. The technology sector is a hallmark of sustainable funds, and DSI is no exception. Microsoft (MSFT), Alphabet GOOG, and NVIDIA (NVDA) all are among its top 10 holdings, as is Tesla (TSLA). Other top holdings include Visa (V), Procter & Gamble (PG), Home Depot (HD), and MasterCard (MA).

The expense ratio of DSI is 0.25%.

DSI Performance

You don't have to give up profits to invest in ESG. A hypothetical $10,000 investment of $10,000 in DSI on Jan. 1, 2018, would have been worth about $20,900 at its peak at the start of 2022. In mid-December 2023, it was worth $19,702.32, up by nearly 97.02%.

Note that this strong performance does vary from period to period. For example, DSI's one-year average annual return between September 2022 and September 2023 was 23.32%. However, it was only 9.67% over the three-year period ending September 2023 and 8.76% since the fund's inception. Note that the after-tax post-liquidation return since inception is 7.35% as of September 2023.

How Do I Know If an ETF Really Is ESG?

The ESG ETF industry has grown enough that there are people who rate them for their adherence to ESG principles as well as their profits. For example, the financial services firm VettaFi scores ETFs for their exposure to clean and not-so-clean technologies.

Are There Standards for ESG Investors to Follow?

Standards for ESG reporting by companies are still being developed. That means the investor is responsible for determining whether a company or an ETF is really following principles of environmental, social, and governance accountability as part of the decision-making process.

A number of institutions, including the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD), are working on standards for companies to follow in reporting their ESG compliance.

Are There Sustainable Bonds?

Absolutely. The Nasdaq maintains a database of issuers of sustainable corporate bonds so that investors can choose to loan their money to companies that are investing it in clean technologies and environmentally-sound projects. The quasi-governmental housing agency Fannie Mae also offers "green bonds" and "social bonds."

The Bottom Line

The iShares MSCI KLD 400 Social ETF is an exchange-traded fund that aims to track the performance of the MSCI KLD 400 Social Index. This index comprises over 400 U.S. companies with strong environmental, social, and governance profiles. With $3.6 billion of assets under management, this fund is a great option for investors looking to get a kick-start on sustainable investing.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. iShares. “iShares MSCI KLD 400 Social ETF.”

  2. Statista. "Largest ESG ETFs in the Americas as of July 2023, Based on Assets Under Management."

  3. iShares. "iShares MSCI KLD 400 Social ETF."

  4. iShares. "iShares MSCI KLD 400 Social ETF."

  5. VettaFi. "Environmentally Responsible ESG Scores."

  6. Fannie Mae. "Designing for Impact."

  7. Nasdaq. "Nasdaq Sustainable Bond Network."

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Part of the Series
Types of ETFs Explained
What's an ETF
  1. Exchange-Traded Fund (ETF) Types and Benefits Explained
  2. 6 Common ETF Types for Your Portfolio
  3. An Inside Look at ETF Construction
  4. Custom Basket ETFs
  5. Single-Stock ETF Definition
  6. Passive ETF: What It Means, How It Works
  7. Actively Managed ETF: Meaning, Overview, Limitations
Types and Details
  1. Index ETF: Definition, Types, Advantages, and Risks
  2. Smart Beta ETF: Definition, Types, Example
  3. Diamonds ETF: Meaning, Popularity, Statistics
  4. No-Fee ETF: What It Means, History, Criticism
  5. Dividend ETF: What it Means, How it Works
  6. Value vs. Growth ETFs: How Do You Choose?
  7. Benefits and Risks of Thematic ETFs
  8. Factor ETFs: Meaning, Effectiveness, Examples
  9. Benefits of a Covered Call ETF
  10. Leveraged ETFs: The Potential for Bigger Gains—and Bigger Losses
  11. Ultra ETF: What It Means, Benefits, Limitations
Equity Funds
  1. ETFs For Sector Rotation Strategies
  2. What Is a Sector ETF, How Do You Invest in One?
  3. Services Sector ETF: Meaning, Examples, Pros and Cons
  4. Airline Industry ETF
  5. Auto Industry ETF: What It is, How It Works, Example
  6. What Common ETFs Track the Banking Sector?
  7. Which Leveraged ETFs Track the Banking Sector?
  8. Biotechnology ETF: What It Is and How To Invest
  9. Communication Industry ETF Definition
  10. Food Industry ETF: What It is, How it Works, Pandemic Impact
  11. Gaming Industry ETF: What It is, How It Works, Examples
  12. Insurance Industry ETF: Meaning, Example, Pros and Cons
  13. Retail Industry ETF: What It is, How It Works
Real Estate and Specialty ETFs
  1. A Look at One of the Largest Sustainable Investing ETFs
    CURRENT ARTICLE
  2. ETFs for the Driverless Car Revolution
  3. Emerging Market ETF: Meaning, Pros and Cons
  4. The Vegan ETF - All About How the VEGN Fund Works
  5. REIT ETF: What it is, How it Works, Special Considerations
Currency Funds
  1. Currency ETF: Meaning, Special Considerations, Examples
  2. How Currency-Hedged ETFs Work
Inverse ETFs
  1. Inverse ETF: Definition, Comparison to Short Selling, and Example
  2. Inverse ETFs Can Lift a Falling Portfolio
  3. The Risks of Investing in Inverse ETFs