Top 5 ESG ETFs for Socially Conscious Investors This Year

So, you’re ready to put your money where your values are. You've learned the fundamentals from our "A Beginner's Guide to ESG Investing in 2025" and you're committed to the idea of building a portfolio that does good in the world.

Now comes the most important question: where do you actually invest?

For most socially conscious investors, the answer is ESG ETFs. These Exchange-Traded Funds offer a simple, low-cost, and diversified way to invest in a basket of companies that have been screened for positive Environmental, Social, and Governance practices. But with hundreds of options on the market, choosing the right one can feel overwhelming.

That's where we come in. We've done the heavy lifting to identify the top 5 ESG ETFs for investors this year. This list includes a range of options, from broad, diversified core holdings to more targeted funds, helping you build a powerful and ethical portfolio.

How Did We Choose the Best ESG ETFs?

Before we dive into the list, it's important to understand our selection criteria. A great ESG ETF is more than just a fancy name; it's a combination of strong ethics, solid construction, and fair costs.

Here’s what we looked for in our analysis:

1. Clear ESG Methodology: How does the fund define "good"? We prioritized funds with transparent, robust, and easy-to-understand ESG screening processes. We looked for funds that do more than just basic negative screening.
2. Low Expense Ratio: Costs matter. A high expense ratio can significantly eat into your returns over time. All the funds on our list are low-cost ESG ETFs, ensuring more of your money stays invested and working for you.
3. Strong Diversification: A good core ETF should provide broad exposure to the market, reducing your risk. We looked for funds that hold a wide range of companies across different sectors.
4. Performance and Track Record: While past performance is not a guarantee of future results, we considered funds with a solid history of tracking their underlying index and delivering competitive returns.
5. Asset Size and Liquidity: Larger funds with high trading volumes are generally easier to buy and sell at fair prices, a key consideration for any investor.

With that framework in mind, let's get to our top picks.

1. iShares ESG Aware MSCI USA ETF (ESGU)

Why is ESGU a top choice for a core holding?

The iShares ESG Aware MSCI USA ETF (ESGU) is arguably the best starting point for any US-based socially conscious investor. It’s designed to be a foundational piece of your ESG portfolio, offering broad exposure to US large- and mid-cap companies that have favorable ESG ratings.

Think of ESGU as a slightly improved version of the S&P 500. It tracks an index that is very similar to the overall US stock market but makes two important adjustments: it removes the worst offenders and tilts its holdings toward companies with better ESG scores.

Key Details:

• Expense Ratio: Very low, typically around 0.15%.
• ESG Strategy: "Best-in-class" or positive screening. It doesn't exclude entire industries (except for controversial weapons, tobacco, etc.). Instead, it aims to hold the companies with the best ESG performance within each sector.
• What It Holds: You'll find familiar names like Microsoft, Apple, Amazon, and NVIDIA in its top holdings, as these companies generally have strong ESG ratings relative to their peers.
• Who It's For: The investor who wants a simple, low-cost, and highly diversified core holding that mirrors the US market but with an ethical tilt. It’s perfect for your main investment account or even a 401(k) if available. Learn more about that in "How to Align Your 401(k) With Your Personal Values."

The Bottom Line: ESGU is not for the purist who wants to exclude entire sectors like big tech or energy. However, for the pragmatic investor looking for a simple, one-and-done solution for the US portion of their portfolio, it's an outstanding and low-cost ESG ETF.

2. Vanguard ESG U.S. Stock ETF (ESGV)

Why is ESGV a great option for stricter screening?

The Vanguard ESG U.S. Stock ETF (ESGV) is the ideal choice for investors who want a stricter, more exclusionary approach to their ethical portfolio. While ESGU (our #1 pick) takes a "best-in-class" approach, ESGV takes a harder line by completely removing entire industries from its portfolio.

If you are an investor who firmly believes that your money should not go to certain sectors, no matter how "good" a company is within that sector, this Vanguard ESG fund is designed for you.

Key Details:

• Expense Ratio: Extremely low, typically around 0.09%. Vanguard is famous for its low costs.
• ESG Strategy: Exclusionary screening. This fund explicitly excludes companies involved in fossil fuels, firearms, alcohol, gambling, and adult entertainment. It offers a much "cleaner" portfolio from a purist's perspective.
• What It Holds: Because it excludes entire industries, its composition is noticeably different from the broader market. For example, you won't find ExxonMobil or Philip Morris here. It still holds hundreds of stocks, providing good diversification.
• Who It's For: The socially conscious investor with strong convictions. If your primary goal is to ensure your portfolio is a fossil fuel-free fund, ESGV is one of the best and most cost-effective ways to achieve that. It's the perfect tool for the strategy we outline in "The Ultimate Guide to Fossil Fuel-Free Investing."

The Bottom Line: ESGV offers a clear, powerful, and low-cost way to align your investments with deeply held ethical principles. Its strict exclusionary rules make it one of the top ESG ETFs for investors who want to make a definitive statement with their capital.

3. iShares MSCI KLD 400 Social ETF (DSI)

Why is DSI considered the original and most established ESG ETF?

The iShares MSCI KLD 400 Social ETF (DSI) is the original gangster of the ESG world. It tracks the MSCI KLD 400 Social Index, one of the very first socially responsible investing (SRI) indexes created back in 1990. For investors who value a long track record and a time-tested methodology, DSI is a fantastic choice.

This fund is for the investor who wants to be sure their portfolio has stood the test of time. Its longevity provides a wealth of data on how a well-constructed ethical portfolio performs through various market cycles.

Key Details:

• Expense Ratio: Higher than our first two picks, typically around 0.25%, but still reasonable for a more specialized fund.
• ESG Strategy: A hybrid approach. It uses extensive negative screening to exclude companies involved in alcohol, gambling, nuclear power, weapons, and tobacco. Then, it uses positive screening to select companies with high ESG scores from the remaining universe.
• What It Holds: A concentrated portfolio of 400 US companies with outstanding ESG track records.
• Who It's For: The investor who appreciates history and a proven methodology. It's also for those who want a more concentrated portfolio of ESG leaders, rather than a broad market-like fund. It's a key component for those learning "How to Build an Ethical Investment Portfolio That Actually Performs."

The Bottom Line: DSI is the seasoned veteran of socially responsible ETFs. Its higher expense ratio is a trade-off for its long history and well-respected, rigorous screening process. It’s a powerful tool for building a portfolio of true ESG leaders.

4. SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)

Why is SPYX the best choice for a targeted climate focus?

The SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) does exactly what its name says: it gives you the S&P 500, but without any companies that own fossil fuel reserves. For the climate-conscious investor, this is one of the most direct and effective tools available.

Many investors are surprised to learn that some broad ESG funds still contain major energy companies. SPYX was created to solve this specific problem. It offers a simple, elegant solution for those whose primary ethical concern is climate change.

Key Details:

• Expense Ratio: Low, typically around 0.20%.
• ESG Strategy: Pure negative screening focused on a single issue. It takes the S&P 500 index and simply removes any company with proven coal, oil, or natural gas reserves.
• What It Holds: The S&P 500 minus companies like ExxonMobil, Chevron, and ConocoPhillips. The rest of the portfolio, including its sector weightings, remains very similar to the parent index.
• Who It's For: The climate-focused investor. If your main goal is divestment from fossil fuels, this is your ETF. It allows you to maintain broad market exposure while making a clear statement on climate.

The Bottom Line: SPYX isn't a comprehensive ESG ETF—it doesn't screen for social or governance issues. However, it is the best-in-class tool for one specific and crucial job: decarbonizing your portfolio. It's a perfect example of targeted impact investing.

5. iShares Global Clean Energy ETF (ICLN)

Why is ICLN the top choice for aggressive, thematic impact investing?

The iShares Global Clean Energy ETF (ICLN) is for the investor who wants to move beyond just avoiding harm and actively invest in the solutions to climate change. This is a thematic ETF that invests directly in companies at the forefront of the global clean energy transition.

Unlike the other funds on this list, ICLN is not a diversified core holding. It is a concentrated, high-risk, high-reward satellite position for an investor who is bullish on the future of renewable energy.

Key Details:

• Expense Ratio: The highest on our list, typically around 0.40%, which is common for thematic ETFs.
• ESG Strategy: Thematic impact investing. It invests only in companies that are involved in solar, wind, and other renewable power sources, as well as the technologies that support them.
• What It Holds: A global portfolio of about 100 companies like Enphase Energy, First Solar, and Vestas Wind Systems.
• Who It's For: The aggressive, socially conscious investor who wants to make a targeted bet on the clean energy sector. It should be used as a smaller, satellite holding to complement a diversified core portfolio, not as the main investment.

The Bottom Line: ICLN is a pure-play impact investing fund. It offers the potential for high growth but also comes with significant volatility. It's a powerful tool for investors who want to put their capital directly behind the green revolution, but it must be used wisely within a well-diversified portfolio. For more on this approach, see "Beyond Stocks: Impact Investing in Your Local Community."

How to Choose the Right ESG ETF for You

There is no single "best" ESG ETF for everyone. The right choice depends entirely on your personal values, risk tolerance, and overall financial strategy.

• If you want a simple, diversified, "set it and forget it" core: Start with ESGU.
• If you want to strictly exclude fossil fuels and other "sin" stocks: ESGV is your best bet.
• If you value a long track record and a focus on ESG leaders: Look at DSI.
• If your number one priority is climate change: SPYX is the perfect tool.
• If you want to make a high-impact, aggressive bet on clean energy: Add a small position in ICLN.

Remember to always do your own research and look at the latest fund documents before investing. And be wary of "Greenwashing"; always check a fund's top holdings to ensure they align with your expectations.

Now, we want to hear from you: Based on this list, which type of ESG ETF is most appealing to you and your personal investment philosophy? The broad and balanced approach, the strict exclusionary one, or the targeted thematic fund?

Share your choice in the comments below! Your answer will help other readers in our community think through their own options.