Are ESG ETFs suitable for long-term or short-term investment?

ESG ETFs tend to be best-suited for long-term investing. Though a commitment to sustainable practices and good governance often boosts profits in the long run, it's unlikely to yield major short-term gains.

How does an ESG ETF differ from a regular ETF?

An ESG ETF is the same as a regular ETF in that both invest in a basket of many different stocks, but an ESG ETF invests only in companies that meet certain environmental, social, and governance criteria.

Which companies or sectors are typically included in ESG ETFs?

Tech stocks, like Nvidia, Microsoft, Apple, and Alphabet, are frequently included in ESG ETFs. Other heavily represented sectors include healthcare, utilities (particularly those with a clean energy focus), and consumer staples.

What fees or expenses are associated with ESG ETFs?

The fee structure for ESG ETFs is the same as for regular ETFs. Fees are expressed as the expense ratio and deducted from your upfront investment. For example, if you invest $1,000 in an ETF with a 0.2% expense ratio, you'll pay $2 in fees, leaving $998 to invest. The ESG ETFs on this list have expense ratios ranging from 0.1% to 0.4%.

How do ESG ETFs compare to traditional index ETFs in returns and volatility?

Broad ESG ETFs are often similar to traditional index ETFs in terms of returns and volatility. Thematic funds, like those focused on clean energy or climate change, are significantly more volatile. These funds have more potential to deliver outsize returns, especially in the short term, but they're also much riskier than broad ESG ETFs.

What is the ESG version of the S&P 500?

Standard & Poor's also has the S&P 500 ESG Index, which comprises more than 300 S&P 500 companies that meet certain sustainability criteria.

Best ESG ETFs to Buy in 2026

By Robin Hartill, CFP – Updated May 1, 2026 at 2:50 PM EST | Fact-checked by Frank Bass

Key Points

ESG ETFs focus on companies adhering to specific environmental, social, and governance criteria.
Political issues and market conditions have led to a significant $27 billion outflow from these funds in 2025.
Despite recent underperformance, ESG funds may benefit long-term investors prioritizing ethics and risk management.

Loading paragraph...

Data source: Yahoo! Finance. Data current as of April 27, 2026.
ESG ETF	Net Assets	Expense ratio	Benchmark index
iShares ESG Aware MSCI USA ETF (NASDAQ:ESGU)	$14.8 billion	0.15%	MSCI USA Extended ESG Focus Index
Vanguard ESG U.S. Stock ETF(NYSEMKT:ESGV)	$11.1 billion	0.09%	FTSE US All Cap Choice Index, but is screened for certain ESG criteria
iShares Global Clean Energy ETF (NASDAQ:ICLN)	$2.1 billion	0.39%	S&P Global Clean Energy Index
iShares ESG Aware MSCI EAFE ETF (NASDAQ:ESGD)	$10.7 billion	0.20%	MSCI EAFE Extended ESG Focus Index
Vanguard ESG International Stock ETF (NYSEMKT:VSGX)	$5.8 billion	0.10%	FTSE Global All Cap ex US Choice Index, but is screened for various ESG criteria

Loading table...

Loading paragraph...

NASDAQ: ESGU

iShares Trust - iShares Esg Aware Msci Usa ETF

Today's Change

(0.01%) $0.01

Current Price

$160.81

Key Data Points

Day's Range

$159.78 - $161.47

52wk Range

$125.98 - $163.15

Volume

Loading company_card...

The iShares ESG Aware MSCI USA ETF (ESGU +0.01%) tracks the MSCI USA Extended ESG Focus Index. The index is derived from the MSCI USA Index, which tracks the broad performance of U.S. large- and mid-cap stocks.

Fund areas of exclusion include:

Nuclear weapons.
Controversial weapons.
Tobacco.
Civilian firearms.
Oil sands.
Thermal coal.
UN Global Compact violators.

The ETF had more than 280 holdings in April 2026. Its largest positions included Nvidia (NVDA -1.38%), Microsoft (MSFT +0.36%), Apple (AAPL -0.85%), Google parent company Alphabet (GOOG -0.19%) (GOOGL -0.13%), and Amazon (AMZN +0.21%).

Launched in 2016, the fund had underperformed the S&P 500 on both a one- and five-year basis through the end of 2025.

Loading paragraph...

2. Vanguard ESG U.S. Stock ETF

Loading paragraph...

NYSEMKT: ESGV

Vanguard World Fund - Vanguard Esg U.s. Stock ETF

Today's Change

(-0.19%) $-0.25

Current Price

$129.68

Key Data Points

Day's Range

$128.84 - $130.47

52wk Range

$101.58 - $132.07

Volume

Loading company_card...

The Vanguard ESG ETF (ESGV -0.19%) holds more than 1,200 U.S. stocks. It's a passive ETF that uses exclusionary principles. Companies left out include those that derive revenue from production, supplying, or retailing in the following areas:

Controversial weapons.
Civilian firearms.
Nuclear power.
Fossil fuels.
Tobacco.
Cannabis.
Conventional military weapons.
Alcohol.
Gambling.
Adult entertainment.

Companies are also screened for various diversity criteria. Violations of labor, human rights, anti-corruption, or environmental standards can disqualify companies. Its largest holdings include Apple, Nvidia, Microsoft, Alphabet, Amazon, and Meta Platforms (META -0.52%).

Since its inception in 2018, the fund's returns have slightly lagged the returns of the top S&P 500 ETFs.

3. iShares Global Clean Energy ETF

Loading paragraph...

NASDAQ: ICLN

iShares Trust - iShares Global Clean Energy ETF

Today's Change

(-2.11%) $-0.46

Current Price

$21.33

Key Data Points

Day's Range

$21.04 - $21.96

52wk Range

$12.30 - $22.17

Volume

14K

Loading company_card...

iShares Global Clean Energy ETF (ICLN -2.11%) tracks the S&P Global Clean Energy Index. It specifically focuses on clean energy production, equipment, and technologies, and holds stakes in about 100 companies. There are also significant positions in wind and solar energy.

The ETF’s largest holdings include Bloom Energy Corp. (BE -6.25%), First Solar Inc. (FSLR +0.12%), Iberdrola SA Inc. (IBDRY +1.84%), SSE PLC (OTC:SSEZ.Y), Vestas Wind Systems (VWDRY +4.04%), and Enphase Energy.

The fund had an abysmal 2024, but shares rebounded by about 45% in 2025. The surge reflects renewed investor interest in the clean energy sector, as data centers and the growing adoption of electric vehicles (EVs) have driven electricity demand to soar.

However, the ETF has been a lackluster performer in the long term. But if you believe that clean energy will be a profitable investment in the long run, this clean energy ETF may be worth considering.

Loading paragraph...

NASDAQ: ESGD

iShares Trust - iShares Esg Aware Msci Eafe ETF

Today's Change

(0.96%) $0.96

Current Price

$101.43

Key Data Points

Day's Range

$100.60 - $101.56

52wk Range

$85.48 - $104.81

Volume

0.8

Loading company_card...

iShares ESG Aware MSCI EAFE ETF's (ESGD +0.96%) benchmark index tracks the performance of large- and mid-cap stocks with positive ESG characteristics in developed markets outside the U.S. and Canada.

Fund areas of exclusion are:

Nuclear weapons.
Controversial weapons.
Tobacco.
Civilian firearms.
Oil sands.
Thermal coal.
UN Global Compact violators.

The fund has more than 380 holdings, the largest of which include SAP SE (SAP +3.03%), ASML Holding (ASML -1.97%), Novartis AG (NVS +0.66%), AstraZeneca (NASDAQ:AZN), and HSBC Holdings PLC (HSBC +1.98%).

Since its launch in 2016, the fund has had average annual returns of about 9.5%, significantly lower than the S&P 500 for the same period.

Loading paragraph...

5. Vanguard ESG International Stock ETF

Loading paragraph...

NYSEMKT: VSGX

Vanguard World Fund - Vanguard Esg International Stock ETF

Today's Change

(0.42%) $0.33

Current Price

$78.91

Key Data Points

Day's Range

$78.31 - $79.71

52wk Range

$62.53 - $81.12

Volume

135

Loading company_card...

The Vanguard ESG International Stock ETF (VSGX +0.42%) holds about 6,600 stocks. Its regional allocation includes 35% in European companies, 28% in emerging markets, and 28% in the Pacific.

The fund's benchmark index uses ESG exclusionary principles, avoiding companies that derive revenue from the production, supplying, or retailing of:

Controversial weapons.
Civilian firearms.
Nuclear power.
Fossil fuels.
Tobacco.
Cannabis.
Conventional military weapons.
Alcohol.
Gambling.
Adult entertainment.

Companies are also filtered for workplace and board diversity, labor and human rights principles, and environmental standards. To be included, companies must also meet the U.N. Global Compact principles.

The largest holdings include Taiwan Semiconductor Manufacturing (TSM -2.10%), ASML Holding NV, Alibaba Group Holding (BABA +0.51%), and Samsung Electronics Co. Ltd. (OTC:SSNFL).

The fund delivered one-year returns of about 26% as of late April 2026. Its long-term performance has been relatively poor, with five-year returns of about 6%. However, if you want significant exposure to companies with strong ESG standards in emerging markets, you might want to check out the VSGX ETF.

Loading paragraph...

How to buy ESG ETFs

1. Open your brokerage account: Log in to your brokerage account where you handle your investments. If you don't have one yet, take a look at our favorite brokers and trading platforms to find the right one for you.
2. Search for the ETF: Enter the ETF's ticker into the search bar to bring up the stock's trading page.
3. Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
4. Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
5. Submit your order: Confirm the details and submit your buy order.
6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

Loading paragraph...

Benefits and risks of investing in ESG ETFs

Benefits

Values-based investing: ESG ETFs allow you to invest in companies that align with your values -- or avoid those whose practices you find objectionable, depending on the fund's approach.
Thematic approach to investing: Some ESG ETFs allow you to invest in specific themes, such as sustainable agriculture or climate solutions. Investing in these funds is riskier than investing in a broad ESG ETF. However, it's generally a safer bet compared to investing in a single company or two.
Long-term focus: Investing in ESG ETFs can also benefit your bottom line. Companies that adhere to ESG principles may be less likely to face litigation or regulatory scrutiny. Businesses with a strong focus on sustainable infrastructure and fair labor practices often create greater long-term shareholder value than those that cut corners to achieve short-term profits.

Risks

Inconsistent ESG standards: There’s no universal definition of what qualifies as ESG, and rating systems can vary widely between providers. That means two ESG ETFs may hold very different companies, including those that don't meet your definition of socially responsible.
Potential for sector concentration: Some ESG ETFs exclude entire industries, such as fossil fuels, tobacco, or defense. While that aligns with certain values, it can also limit diversification and lead to underperformance if those sectors outperform the broader market. Many ESG funds are also overweight in technology, which can increase volatility.
Higher fees and potential greenwashing: ESG ETFs often come with higher expense ratios than comparable broad-market index funds. Some funds may engage in greenwashing, meaning they market themselves as sustainable without meaningfully different investment strategies, making it harder for investors to know what they’re actually paying for.

Loading paragraph...

Investing in ESG ETFs FAQ

Loading faq...

About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

TMFRobinHartill

HSBC Holdings is an advertising partner of Motley Fool Money. Robin Hartill, CFP has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Alphabet, Amazon, Apple, Bloom Energy, First Solar, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Alibaba Group, HSBC Holdings, and SAP. The Motley Fool has a disclosure policy.

Best ESG ETFs to Buy in 2026

Key Points

Key Data Points

2. Vanguard ESG U.S. Stock ETF

Key Data Points

3. iShares Global Clean Energy ETF

Key Data Points

Key Data Points

5. Vanguard ESG International Stock ETF

Key Data Points

How to buy ESG ETFs

Benefits and risks of investing in ESG ETFs

Benefits

Related investing topics

Best Blue Chip Stocks to Buy in 2026: Should You Invest?

Top Agriculture Stocks for 2026 and How to Invest

Best Consumer Staples Stocks to Buy in 2026 and How to Invest in Them

ESG, SRI, Impact Investing: What Are They, How to Get Started, and How Funds Have Performed

Investing in ESG ETFs FAQ

About the Author

Read Next

Stocks Mentioned

Premium Investing Services

Key Data Points

Best Blue Chip Stocks to Buy in 2026: Should You Invest?

Top Agriculture Stocks for 2026 and How to Invest

Best Consumer Staples Stocks to Buy in 2026 and How to Invest in Them

ESG, SRI, Impact Investing: What Are They, How to Get Started, and How Funds Have Performed

Investing in ESG ETFs FAQ

Are ESG ETFs suitable for long-term or short-term investment?

How does an ESG ETF differ from a regular ETF?

Which companies or sectors are typically included in ESG ETFs?

What fees or expenses are associated with ESG ETFs?

How do ESG ETFs compare to traditional index ETFs in returns and volatility?

What is the ESG version of the S&P 500?

Top ESG ETFs to consider

1. iShares ESG Aware MSCI USA ETF

2. Vanguard ESG U.S. Stock ETF

4. iShares ESG Aware MSCI EAFE ETF

5. Vanguard ESG International Stock ETF

How to buy ESG ETFs

Benefits of investing in ESG ETFs

Benefits and risks of investing in ESG ETFs

Benefits

The bottom line on ESG ETFs

Related investing topics

FAQ

Key Data Points

Key Data Points

Key Data Points

Key Data Points

3. iShares Global Clean Energy ETF