As ESG Investing Expands, the Theme’s Top Stocks Come Into Focus

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There are some surprises in the most common funds and ETFs as well, as their ESG standings might be questionable to some investors:

  • Amazon.com Inc. (NASDAQ: AMZN) may own Whole Foods and may be among the Big 3 in the cloud, but its core goods-shipping business is far from being clean, and the company is notorious for issues in employee retention and labor relations.
  • Facebook Inc. (NASDAQ: FB) may be the leader in social media, but how many people honestly think social media is bringing people together in harmony these days? In many cases, social media has started to feel like a prequel to The Purge movies.
  • Johnson & Johnson (NYSE: JNJ) has been under pressure about talcum powder and asbestos, and it has even become part of the opioid suits.
  • Coca-Cola Co. (NYSE: KO) may be adding ever more non-sugar-water beverages and moving into healthier drinks and sports drinks, but its number-one namesake product is far from being good for you, even if Warren Buffett likes to have one every day.
  • PepsiCo Inc. (NYSE: PEP) also has gone deeper into drinks other than sugar-water and diet soda, but not many people think of Fritos, Cheetos and Doritos as healthy.
  • McDonald’s Corp. (NYSE: MCD) scores high in ESG funds as well, but how many people think of the world’s top fast-food chain as being a health-food destination?
  • Union Pacific Corp. (NYSE: UNP) as one of the top train operators in America seems surprising here, considering the pollution caused, polluting goods moved around the country and the wrecks. We won’t even get into the annoyance and time-suck that trains cause drivers that get caught by them.
  • Starbucks Corp. (NASDAQ: SBUX) may pay employees better and offer better insurance and benefits, but all those calorie bomb coffee-drinks are not exactly healthy. Looking up the calories, fat, carbs and sodium content in these offerings may offer a surprise for many of its customers.

And here are the top funds and ETFs, which also may change through time:

  • The iShares ESG MSCI USA Leaders ETF (NASDAQ: SUSL) had close to $1.6 billion in assets, and the top 10 stocks had a total of 28% of the entire fund’s weighting.
  • The iShares MSCI USA ESG Select ETF (NYSEARCA: SUSA), formerly with the KLD ticker, was shown to have 98.9% coverage of the MSCI USA ESG Select Index. It had almost $1.2 billion in assets under management, and of the 122 holdings the top 10 had a 29% total weighting.
  • The iShares MSCI KLD 400 Social ETF (NYSEARCA: DSI) tracks the MSCI KLD 400 Social Index and has almost $1.6 billion in assets under management. With 405 holdings (from 400 issuers), the top 10 holdings had a combined weighting of 28.4%.
  • The Vanguard FTSE Social Index Fund Admiral Shares (VFTAX) is an open-ended mutual fund with $6.2 billion in the fund, and its top 10 holdings make up about 26% of the entire weighting. It tracks the Vanguard FTSE Social Index Fund and screens for certain social, human rights and environmental criteria.
  • The Vanguard ESG U.S. Stock ETF (ESGV) is still very new and tracks the FTSE (Russell) U.S. All Cap Choice Index. It has almost 1,000 holdings, and the top 10 by weight have a combined 21.5% weight of the entire ETF.
  • The Fidelity U.S. Sustainability Index Fund (FITLX) had about $178 million in assets, and of the 321 issues (326 holdings), the top 10 holdings had a 27.2% weighting. It is shown to normally invest at least 80% of assets in securities included in the MSCI USA ESG Index.
  • The Xtrackers MSCI USA ESG Leaders Equity ETF (NYSEARCA: USSG) tracks the MSCI USA ESG Leaders Index and now has over $1.36 billion in assets. With over 320 holdings, the top 10 have almost a 28% weighting.
  • The FlexShares STOXX US ESG Impact Index Fund (ESG) tracks the STOXX U.S. ESG Impact Index. It has only $50 million in assets, and of the 283 holdings, the top 10 have a total weighting of 33.4% of the entire ETF.


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