Our Favourite ESG Funds - Top-Performing and Low-Fee Options

We outline the top-performing ESG funds and ETFs. ESG funds allow New Zealanders to invest sustainably without the need to choose between a better world and post-tax returns.

Updated 23 July 2021

Summary

New Zealanders are increasingly concerned about investing with ESG factors (environmental, social and governance) in mind.
The number of ESG-focused investments options continues to increase, with ESG opportunities in index funds, KiwiSaver, managed funds and ETFs - we outline what's available below.
How profitable ESG funds are and how 'ethical' a fund is, has never been more transparent with resources such as Mindful Money, Sorted's Smart Investor tool, and Morningstar.
Our research has shown that some ESG funds have performed better than their traditional counterparts.
If you want to know what's on offer, our best overall ESG funds (LINK) and low-fee ESG funds (LINK) tables have you covered.
The number of ESG funds continues to increase, and we update this guide regularly.
The fund returns are shown as after fees but before tax.

Know this: Not all ESG funds are of the same "standard" when it comes to exclusions.

One fund may "consider" ESG factors in their investing decisions, while another may have numerous exclusions upfront before "considering" other factors.
We would argue that Booster and Pathfinder go quite a lot further than most with regards to the number of exclusions they have.
Only a handful of fund managers are RIAA certified - AMP Capital Investors, Booster, Harbour, Kiwi Wealth, Mercer and Pathfinder.
Generally, an ESG fund will exclude companies involved with alcohol production, gambling, tobacco, military weapons, firearms, Nuclear power, fossil fuels, adult entertainment and genetically modified organisms (GMOs), among other things.

Our guide covers:

Disclaimer: Some of the products featured in our guide are from commercial partners who work with MoneyHub. Such arrangements do not influence our evaluations, and we use Morningstar and Forbes data to disclose each fund's returns. Our advertising policy has more details.

The information provided is for educational purposes only and is not financial advice (general or specific to any situation). MoneyHub does not offer investment services, nor does it recommend or advise readers to buy or sell any fund, share or other investment product.

What is an ESG Fund?

An ESG fund is a fund that meets ESG (environmental, social and governance) principles. For example, the fund will have an investment strategy to buy shares in companies with a sustainable and social focus. For example, they may be companies focused on zero-carbon emissions, using renewable resources and/or enabling diversity in their human resources.

Importantly, ESG funds are just like other managed funds or index funds - they invest in dozens or up to thousands of individual companies. This means the risks (and returns) are diversified so that if one company performs poorly, your fund won't be adversely affected.

What are the benefits of ESG funds?

There is a belief that ethical companies who embody ESG principles will care about the environment they operate in and have the highest behavioural standards, will, generally, function better financially. Specifically, such companies are more likely to have a long-term growth focus, build solid foundations and are less likely to be mismanaged or involved in scandals.

To back this belief up, a 2019 study by Morgan Stanley compared the returns of 11,000 managed funds between 2004 to 2018 and concluded that there is no trade-off between traditional funds and ESG funds. Best of all, ESG funds were found to be a lower risk investment.

Many New Zealanders, aware of ESG investing and the problems of funds that invest in weapons (due to media reports) are looking to include ESG funds as part of their investment portfolio.

1. Best Overall: Top Performing ESG KiwiSaver Funds

We have relied on data from Morningstar to shortlist five top-performing KiwiSaver options you may want to consider. Please note, we have used one-year returns as many KiwiSaver ESG funds are less than three years old due to the emergence of ethical funds in recent years. This list is not an endorsement of these funds. Returns are shown as After Fees/Before Tax.

We appreciate that one-year returns are not generally sufficient to make an informed decision about whether or not a fund is a credible investment. We will use three-year returns when these become available. Booster was the first KiwiSaver scheme to offer ethical funds and has a long-term track record dating back to 2010. Because of the availability of data, we have placed the two popular Booster ESG funds #1 and #2 on our list. Past returns are not a reflection of future results.

Booster KiwiSaver SRI High Growth Fund

Management Fee: 1.32% p.a.
1 Year Return as of 30 June 2021: 22.28%
10 Year Return as of 30 June 2021: 10.21% (We have placed this fund first on the list given its ten-year returns which no other fund offers).
Fund overview: The Socially Responsible Investment High Growth Fund invests predominantly in growth assets, with little or no income assets.
Investments: Companies the fund invests into include Microsoft, Fisher & Paykel Healthcare, Vanguard (international property fund) and Auckland International Airport.
More details: Booster Ethical Investing Funds

Booster KiwiSaver SRI Balanced Fund

Management Fee: 1.26% p.a.
1 Year Return as of 30 June 2021: 13.30%,
5 Year Return as of 30 June 2021: 9.23% (We have placed this fund second on the list given its five-year returns)
Fund overview: The Socially Responsible Investment Balanced Fund invests in a balanced mix of income assets and growth assets.
Investments: Companies the fund invests into include Microsoft, Fisher & Paykel Healthcare, Vanguard (international property fund) and Auckland International Airport.
More details: Booster Ethical Investing Funds

Pathfinder KiwiSaver Growth Fund

Management Fee: 1.29% p.a.
1 Year Return as of 30 June 2021: 29.51%
Fund overview: The Pathfinder KiwiSaver Growth Fund has a higher exposure to growth assets and a lower exposure to income assets.
Investments: Companies the fund invests into include Microsoft, Telstra, Spark and Oceania Healthcare.
More details: Pathfinder KiwiSaver Growth Fund

Pathfinder KiwiSaver Balanced Fund

Management Fee: 1.14% p.a.
1 Year Return as of 30 June 2021: 20.46%
Fund overview: The Pathfinder KiwiSaver Balanced Fund has a higher exposure to growth assets and a lower exposure to income assets.
Investments: Companies and assets the fund invests into include bonds, cash deposits and ESG companies such as Microsoft.
More details: Pathfinder KiwiSaver Balanced Fund

Simplicity KiwiSaver Growth Fund

Management Fee: 0.31% p.a.
3 Year Return as of 30 June 2021: 11.66%
Fund overview: Simplicity's growth fund is similar to many other index-based growth funds offered by the banks and specialist fund managers and invests in leading growth companies.
Investments: Companies the fund invests into include Vanguard Ethically Conscious funds, Ryman Healthcare, Meridian Energy and Fisher & Paykel Healthcare.
More details: Simplicity KiwiSaver review

2. Best Overall: Top Performing ESG Managed Funds

To best present the best ESG funds, we have relied on performance data from Morningstar and extracted funds that are marketed and meet ESG standards. Based on this analysis, we present the top five ESG funds as of 30 June 2021 based on three-year returns. Please be aware, past performance is not a reflection of future results, and MoneyHub does not recommend or endorse any of the funds listed. Returns are shown as After Fees/Before Tax.

Further to this, the list compares single sector/thematic funds (i.e. the Pathfinder Water fund) with multisector funds (such as the Booster High Growth Fund), which isn’t a like for like comparison. As more ESG funds are introduced, we will expand our coverage and separate thematic and multisector funds accordingly.

Booster vs Pathfinder
Please be aware that Booster’s funds are a lot more diversified with around 2,000 holdings in their SRI Balanced Fund and around 600 in their SRI High Growth Fund when compared to Pathfinder. Generally, multi-sector funds tend to be more diversified than sector/thematic funds. What is more suitable to you depends on your risk profile.

Pathfinder Global Responsibility Fund

Management Fee: 0.93% p.a.
3 Year Return as of 30 June 2021: 15.61%
Fund overview: The fund invests in global equities that satisfy Pathfinder’s socially responsible screening. It achieves this by investing in Pathfinder’s wholesale Responsible Investment Fund which targets a portfolio of 200 stocks.
Investments: Companies the fund invests into include LAM Research, Digital Realty, Equinix, Microsoft Corporation and Shopify.
More details: Pathfinder Global Responsibility Fund

Pathfinder Global Water Fund

Management Fee: 1.30% p.a.
3 Year Return as of 30 June 2021: 14.95%
Fund overview: The fund invests directly in companies involved in the water industry that satisfy Pathfinder’s socially responsible investment screening. The fund targets a portfolio of 50 to 100 water stocks that are listed in developed markets.
Investments: Companies the fund invests into include Xylem, Waters Corp, American Waters Works, Masco Corp, Veolia Environment.
More details: Pathfinder Global Water Fund

Booster Socially Responsible High Growth Fund

Management Fee: 3.09% p.a.
3 Year Return as of 30 June 2021: 12.90%
Fund overview: Booster's Socially Responsible High Growth Fund fully invests in a diversified portfolio of capital growth assets with little or no allocation to income-generating fixed interest securities.
Investments: Companies the fund invests into include Microsoft Corporation, Roche, NVIDIA, The Home Depot and PepsiCo.
More details: Booster Ethical Investing Funds

AMP Capital Ethical Leaders NZ Shares Fund

Management Fee: 0.94% p.a.
3 Year Return as of 30 June 2021: 16.07%
Fund overview: The fund is a diversified portfolio of predominantly New Zealand shares across a range of industries and sectors. The portfolio may also invest in Australian shares.
Investments: Companies the fund invests into include a2 Milk, Fisher & Paykel Healthcare, Ryman, Spark and Contact Energy.
More details: AMP Capital Ethical Leaders NZ Shares Fund

Booster Socially Responsible Balanced Fund

Management Fee: 2.81% p.a.
3 Year Return as of 30 June 2021: 8.11%
Fund overview: Booster's Socially Responsible Balanced Fund invests in a diversified portfolio of income-generating fixed interest securities, combined with a similar exposure to capital growth asset
Investments: Companies the fund invests into include Microsoft Corporation, Roche, NVIDIA, The Home Depot and PepsiCo.
More details: Booster Ethical Investing Funds

3. Best Overall: Top Performing ESG ETFs (US-Listed)

There are hundreds of ETFs that track companies that meet positive environmental, social and governance (ESG) characteristics, with most listed in the US. Hatch, Stake and Sharesies are the most popular platforms for New Zealanders to invest directly in the US markets. Returns are shown as After Fees/Before Tax.

Because of the volume of ESG funds, we have relied on data from Forbes' top ESG funds to shortlist five top-performing options you may want to consider. Please note, Forbes excludes funds without at least three years of performance data. We have used five-year returns as these ETFs are long established.

Please be aware, ETFs are bought and sold like shares, and their price can change multiple times per day and trade fees may be charged when you buy/sell an ETF. Funds, however, are bought directly from the manager or via a financial advisor or broker and rarely have a trade fee.

Vanguard FTSE Social Index Fund (VFTAX)

Management Fee: 0.14% p.a.
5 Year Return as of 30 June 2021: 18.40%
Fund overview: The Vanguard FTSE Social Index Fund tracks the FTSE4Good US Select Index. The companies invested in exclude "vice products" (adult entertainment, alcohol, gambling, tobacco), non-renewable energy and weapons (civilian firearms, controversial military weapons, conventional military weapons), as well as companies participating in “controversial conduct and diversity practices.”
Investments: Companies the fund invests into include Apple, Microsoft, Amazon.com, Facebook and Alphabet.

iShares MSCI USA ESG Select ETF (SUSA)

Management Fee: 0.25% p.a.
5 Year Return as of 30 June 2021: 17.50%
Fund overview: The iShares MSCI USA ESG Select fund tracks the MSCI USA Extended ESG Select Index, which excludes (or limits exposure) to companies in industries such as tobacco, alcohol, gambling, nuclear power and controversial weapons.
Investments: Companies the fund invests into include Apple, Home Depot, Microsoft, Facebook and Alphabet.

Parnassus Core Equity Investor (PRBLX)

Management Fee: 0.87% p.a.
5 Year Return as of 30 June 2021: 16.10%
Fund overview: Parnassus Core Equity Investor, unlike most ESG ETFs, is actively managed. Its management avoids investments in companies involved in alcohol or tobacco, weapons, gambling, nuclear and fossil fuels.
Investments: Companies the fund invests into include Microsoft, Applied Materials, Deere & Co, Comcast and Amazon.com.

iShares Global Clean Energy ETF (ICLN)

Management Fee: 0.46% p.a.
5 Year Return as of 30 June 2021: 23.60%
Fund overview: The fund is volatile - in 2020 its return was over 120%. The fund follows the S&P Global Clean Energy Index, which is made up of thirty companies involved in “clean energy-related businesses".
Investments: Companies the fund invests into include Plug Power, Enphase Energy, Verbund, Siemens Gamesa Renewable Energy and Orsted A/S.

Shelton Green Alpha Fund (NEXTX)

Management Fee: 1.28% p.a.
5 Year Return as of 30 June 2021: 21.60%
Fund overview: This actively managed fund selects green economy companies that fund management believes work “to improve human well-being and increase economic efficiencies, while significantly reducing environmental risks and ecological scarcities.”
Investments: Companies the fund invests into include Tesla Inc, Brookfield Renewable, Vestas Wind Systems, JinkoSolar and Moderna.

4. New ESG Funds, ETFs and Other Options

In addition to the above KiwiSaver, managed funds and US-listed ETF ESG investments, there are other options:

1. Kernel Wealth - an index fund manager who launched three ESG funds in mid-2021. As they are new funds, we've not stated their performance; the (external) links below outline each fund's index return for the last five years.

NZ 50 ESG Tilted - This fund invests in global real estate companies with weighting towards sustainable practices.
Global Green Property - This fund includes and adjusts companies in the S&P/NZX 50 according to sustainability factors.
S&P Global Clean Energy - This fund invests in global companies involved in the production or provision of Clean Energy.

2. Smartshares - a NZD-based ETF manager with five ESG ETFs which launched in 2020. We've not stated their performance; the (external) links below outline each fund's fees and recent returns.

How to Choose the Best ESG Funds For You

Deciding to invest in ESG funds adds some extra considerations you may not have when picking more conventional funds, which we outline below to help you make the right decision.

1. Costs vs Returns

Actively managed funds exist to try and beat the returns of a sharemarket index. Unfortunately, this doesn't always work out, and the returns after deducting the costs from running the fund (charged in management fees) may be lower than an index fund.
Index funds and ETFs follow a specific market index and have low management fees as there are no analysts and investment managers.

2. Fund Availability

Outside of US ESG ETFs, of which there are dozens, New Zealand has limited active and index-based ESG funds.
Pathfinder and Booster are, arguably, the most prominent ESG-specific active managers.
Index funds from Simplicity and the newly-launched ESG funds from Kernel are also popular. New Zealand-based ETFs are available from Smartshares.
Whether actively managed or index-based funds/ETFs are suitable for you depends on your investment goals, time frame, and experience. Generally, ESG products (funds and ETFs) are seen as long-term wealth creation investments.

3. Ask yourself - does this ESG investment have an impact?

There is a big difference between a fund that excludes undesirable companies (operating casinos, manufacturing weapons, extracting fossil fuels etc.) and investments with a mission to do "the right thing".
For example, if you want to invest in companies that have diversity and inclusion initiatives, finding a fund that invests in such companies will be a priority.
Alternatively, if you want to invest in renewable energy, you should look for a fund investing in companies that operate wind, hydro and/or solar electricity generation etc.
If you value clean water, look for a fund that invests in water resources. Want to be carbon-neutral? Look for a fund that invests in carbon-neutral companies.
In any case, the benefits of the fund may outweigh the higher management fees that come with a higher-impact investment.

4. Evaluate your existing investments before buying into an ESG fund or ETF

The risk with ESG investing is that you become over-exposed to a particular asset class or industry.
Before investing, look at your current portfolio of funds and shares and make sure you're not concentrated in one area. For example, a KiwiSaver fund that follows the NZX50 is typical, but if you have non-KiwiSaver index funds that track the NZX50 and are now considering an ESG NZX50 fund, you may be over-exposed to the New Zealand sharemarket.
There are plenty of funds and ETFs available; don't rush in before making sure you'll be diversified.

5. Ask about an impact report from now on

It's all very well to invest in a fund or ETF, but it's hard to see if your money is making any difference without knowing the impact.
An impact report should cover the carbon emissions, the gender mix on the board of directors, charitable donations etc.
It may be problematic to aggregate for a fund with dozens of investments, but such documentation is the best way to understand the impact.

What's the Easiest Way to Invest Responsibly?

Popular options include investing in a fund and/or in an ETF. We have listed popular options below, but do not endorse any fund or investment option.

Know This: Respected active managers like Pathfinder and Booster have management fees greater than 1% p.a. for their ESG funds. We understand many New Zealanders who are concerned about the impact of their investments are comfortable paying such fees to a portfolio aligned with their values. However, low-fee ESG funds are widely available with Simplicity Investment Funds and Kernel offering ESG funds for 0.10% p.a. and 0.29% p.a. respectively. Low-cost ESG funds are most likely to be index-based - you can read about index funds, why they are cheaper and their pros and cons here.

Investment Manager (Active or Index Investing)	ESG Offering	ESG KiwiSaver Funds Offered?	Further Details
Booster (Active)	Actively managed SRI funds that invest based on in-depth analysis and ESG factors to help us assess investment opportunities.	Yes	Booster KiwiSaver Review
Pathfinder (Active)	Actively managed, high performing, low-carbon funds focusing on water, energy and other strategic investments.	Yes	Pathfinder KiwiSaver Review Pathfinder Funds (external site)
Kernel Wealth (Index)	Index funds favoured by the world's most sophisticated investors, with a New Zealand and US focus.	No	Kernel Wealth Review
Simplicity (Index)	Low-fee index fund manager adhering to the Principles of the UN Global Compact.	Yes	Simplicity KiwiSaver Review Simplicity Investment Funds Review
Salt Funds Management (Active)	Salt is the manager of the Carbon Fund and other sustainably focused funds.	No	Salt (external website)
SuperLife/Smartshares (Index)	SuperLife (KiwiSaver) and Smartshares (ETFs) are low-fee index investments run by the NZX offering ESG funds.	Yes	SuperLife Review (KiwiSaver) Smartshares Review (ETFs)
Harbour Asset Management (Active)	Harbour's team focuses on Australian and New Zealand companies with a focus on social, environmental and governance performance.	No	Harbour (external website)
Mint (Active)	Mint offers the New Zealand SRI Equity Fund, a single asset class fund, which typically invests in New Zealand listed equities.	No	Mint (external website)
AMP Capital (Active)	AMP offers a variety of ESG funds, managed by specialists such as Mercer, Harbour and others.	Yes	AMP KiwiSaver Review
Mercer (Active)	Mercer's global research team focuses on ESG factors in the investment process for its KiwiSaver funds.	Yes	Mercer KiwiSaver Review