10 Best ESG ETFs In Canada 2022: Environmental Investing

Recent years have seen sustainable investment assets grow at a rapid pace, and investors are increasingly concerned about making a difference with their investments. Investing in assets that provide you with returns while helping our planet is becoming more commonplace now.

Socially responsible investing is becoming mainstream among Canadian investors. As of 2021, 77% of Canadian investors are interested in responsible and ethical investing.

Responsible investing is more than supporting companies that respect the environment. There’s a whole range of values that firms address while still increasing value for investors.

My guide to the best ESG ETFs in Canada will list down some of the top investment vehicles you can add to your portfolio to enjoy guilt-free investment returns by allocating your money to ESG assets.

Best ESG ETFs In Canada

What Are ESG ETFs?

Exchange-Traded Funds (ETF) are an investment vehicle type that lets you gain exposure to a collection of different asset classes in the form of one investment.

You can trade units of an ETF on the stock market during the day, similar to how you can trade shares of an individual stock. However, there are several key differences between ETFs and individual stocks.

Investing in individual stocks means staking the investment returns on your invested capital on the performance of a single company. If the company underperforms the broader market or goes bankrupt, you could risk losing some or all of your money invested in the stock.

Investing in an ETF means that you are effectively spreading your money in an entire collection of assets that aligns with a specific goal, industry, or theme.

ESG ETFs are a niche. ESG stands for environmental, social, and governance, and it’s an investing philosophy that emphasizes building wealth while aligning with your personal values.

ESG ETFs are increasing every day and you have more opportunities to gain broader market exposure without investing in companies that do not align with your values.

An ESG ETF allows you to invest in a portfolio of ESG-rated companies without making the effort to curate a self-directed portfolio, offering you convenience and the peace of mind that you are getting investment returns that align with your personal values.

The Best ESG ETFs In Canada

What Are ESG ETFs?

This section of my guide to the best ESG ETFs in Canada will explore some of the top investment vehicles you can consider adding to your investment portfolio.

The list is diversified across ETFs tracking a wide range of market indices because it considers the ESG ratings of the funds, not just whether the funds invest in green energy companies.

Traditional ESG was based on excluding companies whose products might be controversial, like fossil fuels. Today’s ESG investment products take a more holistic perspective.

For instance, an oil and gas company can make sense as part of an ESG fund if its leaders are working towards minimizing their carbon footprint and meeting other sustainability goals.

Here is a list of some of the best ESG ETFs in Canada that you can consider.

1. iShares ESG Advanced MSCI Canada Index ETF (XCSR)

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Some facts about iShares ESG Advanced MSCI Canada Index ETF (XCSR):

  • Ticker: TSX:XCSR
  • Inception Date: April 15, 2020
  • Assets Under Management: $122.37 million (as of December 21, 2021)
  • Management Expense Ratio: 0.16%

iShares ESG Advanced MSCI Canada Index ETF (XCSR) is a fund that provides you with exposure to the performance of an ESG-oriented index selected at the discretion of the fund manager BlackRock. XCSR ETF currently follows the MSCI Canada IMI Choice ESG Screened 10% Issuer Capped Index.

Investing in XCSR ETF is a way to invest in a basket of large-,mid-, and small-cap Canadian equity securities with a high ESG rating. XCSR ETF is a low-cost fund with an MER of 0.16%. Its top holding is TD Bank, with a 10.59% asset allocation.

The Royal Bank of Canada accounts for 10.30% of its asset allocation, and Shopify accounts for 8.62% of its asset allocation.

2. BMO MSCI Canada ESG Leaders Index ETF (ESGA)

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Some facts about BMO MSCI Canada ESG Leaders Index ETF (ESGA):

  • Ticker: TSX:ESGA
  • Inception Date: January 15, 2020
  • Assets Under Management: $130.40 million (as of December 21, 2021)
  • Management Expense Ratio: 0.17%

BMO MSCI Canada ESG Leaders Index ETF (ESGA) is another Canadian equity ETF that seeks to provide you with investment returns while aligning with ESG criteria.

The fund offers you investment returns by tracking the performance of Canadian equity securities as they are held in the MSCI Canada ESG Leaders Index, net of expenses.

Investing in ESGA ETF offers you exposure to Canadian companies that have higher ESG ratings than their peers, based on the MSCI group’s assessment. ESGA ETF is another low-cost ETF that comes with an MER of 0.17%.

Its top holdings include Shopify (14.10% asset allocation), Canadian National Railway (7.75% asset allocation), and Scotiabank (7.50% asset allocation).

3. iShares ESG Aware MSCI Canada Index ETF (XESG)

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Some facts about iShares ESG Aware MSCI Canada Index ETF (XESG):

  • Ticker: TSX:XESG
  • Inception Date: March 18, 2019
  • Assets Under Management: $164.88 million (as of December 21, 2021)
  • Management Expense Ratio: 0.17%

iShares ESG Aware MSCI Canada Index ETF (XESG) is a fund that seeks to provide you with investment returns while aligning with ESG requirements. The fund currently offers you investment returns by tracking the performance of the MSCI Canada IMI Extended ESG Focus Index, net of expenses.

Investing in XESG ETF offers you exposure to a portfolio of large-, mid-, and small-cap Canadian equity securities as they are held in the underlying index. XESG ETF is a low-cost fund with a 0.17% MER.

Its top three holdings include Shopify (7.22% asset allocation), TD Bank (6.32% asset allocation), and Scotiabank (5.86% asset allocation).

4. Desjardins RI Canada – Low CO2 Index ETF (DRMC)

Desjardins Logo

Some facts about Desjardins RI Canada – Low CO2 Index ETF (DRMC):

  • Ticker: TSX:DRMC
  • Inception Date: September 27, 2018
  • Assets Under Management: $29.37 million (as of December 20, 2021)
  • Management Expense Ratio: 0.27%

Desjardins RI Canada – Low CO2 Index ETF (DRMC) is another Canadian equity fund that seeks to provide you with investment returns while aligning with ESG values. The fund offers you investment returns by tracking the performance of the Scientific Beta Desjardins Canada RI Low Carbon Index, net of expenses.

DRMC ETF offers you exposure to 61 Canadian equity securities as they are held in the underlying index. DRMC is an actively-managed fund that comes with a 0.27% MER. Its top three holdings include Shopify (11.70% asset allocation), Royal Bank of Canada (10.3% asset allocation), and TD Bank (9.00% asset allocation).

5. BMO MSCI USA ESG Leaders Index ETF (ESGY)

BMO logo

Some facts about BMO MSCI USA ESG Leaders Index ETF (ESGY):

  • Ticker: TSX:ESGY
  • Inception Date: January 15, 2020
  • Assets Under Management: $906.21 million (as of December 21, 2021)
  • Management Expense Ratio: 0.22%

BMO MSCI USA ESG Leaders Index ETF (ESGY) is a fund that seeks to provide you with investment returns while aligning with ESG values. It is a Canada-listed fund, but it tracks the performance of US-listed equity securities as they are held in the MSCI USA ESG Leaders Index, net of expenses.

The underlying fund invests in publicly-traded US companies with higher MSCI ESG ratings than their peers.

ESGY ETF is a relatively higher-cost ETF with an MER of 0.22%. The fund’s top three holdings include Microsoft Corp. (11.20% asset allocation), Alphabet Inc. (GOOGL) (4.14% asset allocation), and Alphabet Inc. (GOOG) (3.98% asset allocation).

6. BMO MSCI EAFE ESG Leaders Index ETF (ESGE)

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Some facts about BMO MSCI EAFE ESG Leaders Index ETF (ESGE):

  • Ticker: TSX:ESGY
  • Inception Date: January 16, 2020
  • Assets Under Management: $6.76 million (as of December 21, 2021)
  • Management Expense Ratio: 0.28%

BMO MSCI EAFE ESG Leaders Index ETF (ESGE) is another equity fund listed in Canada that seeks to provide you with investment returns while aligning with ESG values. The fund tracks the performance of the MSCI EAFE ESG Leaders Index.

The fund holds securities as they are held by the underlying fund. ESGE ETF tracks the performance of companies in developed equity markets, excluding Canadian and US-based companies.

ESGE ETF is a relatively higher cost ETF with a 0.28% MER. It currently holds 403 equity securities. Its top three investments include ASML Holding NV (3.74% asset allocation), Roche Holding (3.30% asset allocation), and Novo Nordisk (2.07% asset allocation).

7. iShares ESG Advanced MSCI USA Index ETF (XUSR)

ishares logo

Some facts about iShares ESG Advanced MSCI USA Index ETF (XUSR):

  • Ticker: TSX:XUSR
  • Inception Date: April 15, 2020
  • Assets Under Management: $137.44 million (as of December 21, 2021)
  • Management Expense Ratio: 0.22%

iShares ESG Advanced MSCI USA Index ETF (XUSR) is another US-equity fund listed on the Canadian stock exchange. The fund seeks to provide you with investment returns by tracking the performance of large- and mid-cap US equity securities that meet a minimum standard for ESG attributes.

The fund invests in US-listed equity securities as they are held by the MSCI USA Choice ESG Screened Index, net of expenses.

XUSR ETF comes with an MER of 0.22%, and it invests in a total of almost 350 US-listed large- and mid-cap stocks. Its top three holdings include Microsoft Corp. (12.56% asset allocation), Nvidia Corp. (3.91% asset allocation), and Home Depot Inc. (2.21% asset allocation).

8. iShares ESG Aware MSCI USA Index ETF (XSUS)

ishares logo

Some facts about iShares ESG Aware MSCI USA Index ETF (XSUS):

  • Ticker: TSX:XSUS
  • Inception Date: March 18, 2019
  • Assets Under Management: $93.91 million (as of December 21, 2021)
  • Management Expense Ratio: 0.22%

iShares ESG Aware MSCI USA Index ETF (XSUS) is a US equity fund listed on the Canadian stock market. The fund seeks to provide you with investment returns while tracking the performance of large and mid-cap US-listed equity securities that have positive ESG characteristics.

The fund chooses its underlying assets as they are held by the MSCI USA Extended ESG Focus Index.

XSUS ETF comes with an MER of 0.22%, and it invests in over 320 US-listed publicly-traded companies. Its top three holdings include Apple Inc. (6.67% asset allocation), Microsoft Corp. (5.80% asset allocation), and Amazon.com (3.66% asset allocation).

9. Desjardins RI USA Multifactor – Low CO2 ETF (DRFU)

Desjardins Logo

Some facts about Desjardins RI USA Multifactor – Low CO2 ETF (DRFU):

  • Ticker: TSX:DRFU
  • Inception Date: September 27, 2018
  • Assets Under Management: $139.83 million (as of December 20, 2021)
  • Management Expense Ratio: 0.62%

Desjardins RI USA Multifactor – Low CO2 ETF (DRFU) is a fund that seeks to provide you with investment returns while aligning with ESG values. The fund invests in and holds US-listed equity securities that offer better ESG ratings than their peers.

DRFU ETF accomplishes that goal by investing in US-listed equities as they are held by the Scientific Beta Desjardins United States RI Low Carbon Multifactor Index.

DRFU ETF is a costlier fund than all of the others on this list, with an MER of 0.62%. The fund invests in over 210 companies, and its top three investments include Apple Inc. (1.38% asset allocation), Texas Instruments Inc. (1.35% asset allocation), and Xilinx Inc. (1.32% asset allocation).

10. Desjardins RI USA – Low CO2 Index ETF (DRMU)

Desjardins Logo

Some facts about Desjardins RI USA – Low CO2 Index ETF (DRMU):

  • Ticker: TSX:DRMU
  • Inception Date: September 27, 2018
  • Assets Under Management: $113.73 million (as of December 20, 2021)
  • Management Expense Ratio: 0.29%

Desjardins RI USA – Low CO2 Index ETF (DRMU) is another Canadian fund that tracks the performance of US-based companies that align with ESG values. The fund manager selects its investments based on how they are held in the Scientific Beta Desjardins United States RI Low Carbon Index.

The fund invests in over 320 US-listed equity securities, and it comes with an MER of 0.29%. The fund’s top three holdings include Apple Inc. (9.61% asset allocation), Microsoft Corp. (9.20% asset allocation), and Amazon.com Inc. (5.93% asset allocation).

What Is An ESG Fund?

What Is An ESG Fund?

ESG funds are portfolios of equity securities and fixed-income assets like bonds for which the fund manager considers environmental, social, and governance factors during the investment process.

It means that the underlying assets held by an ESG fund have passed rigorous testing to meet the sustainability parameters necessary to give them a qualifying ESG rating.

How To Buy ESG ETFs In Canada

You can purchase the best ESG ETFs in Canada through most Canadian brokerage platforms that offer stock and ETF trading. My top choices are Wealthsimple Trade and Questrade.

ImageProduct TitleFeaturesPrice
Editor's Choice
Wealthsimple Trade
Wealthsimple Trade
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Questrade
Questrade
  • ETF buys have $0 trading fees
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Get $50 Free Stock Trades

To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

Canadian investors who want to make a difference with their investments now have the opportunity to deploy their capital and allocate it to sustainable investment products.

The relatively new nature of this investment type means that there is not much of a track record that you could use to inform your investment decisions in this space. However, past performance is not a guarantee of future results, and the future for the ESG space looks promising.

If you are bullish on a greener future to provide you with superior long-term investment returns, the clean energy industry is another area you could explore. Check out my guide to the best clean energy ETFs in Canada to view the funds that you could consider investing in for this purpose.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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