IShares ESG Aware MSCI USA ETF ESGU integrates environmental, social, and governance considerations without sacrificing much of the benefits of a broadly diversified, low-turnover portfolio. These considerations earn the fund a Morningstar Analyst Rating of Silver.

The fund tracks the MSCI USA Extended ESG Focus Index, which strikes a balance between ESG integration and market representation. The fund’s benchmark applies basic exclusionary criteria to the MSCI USA Index to filter out companies involved in controversial business lines or severe controversies. From there, it employs an optimizer to lean toward companies with high ESG scores while targeting a 0.5% tracking error against the MSCI USA Index. From its inception through March 2023, the fund’s realized tracking error against its parent index hovered around 0.6%, not far from its target. 

The optimizer also applies other constraints relative to the parent index. Sector weights must remain within 5 percentage points of those in the MSCI USA Index, and individual positions can’t deviate by more than 2 percentage points. The resulting portfolio has a similar makeup to its starting universe and the Morningstar Category average. As of March 2023, the fund’s active share relative to its parent index was around 23%, which is fairly low compared with other ESG-intentional peers. Its top holdings are similar to those in the parent index. This should help keep the fund’s performance in line with its parent index and its average category peer. 

That said, its ESG exclusions are relatively light-touch and can include companies that might not have best-in-class ESG practices. This limits its appeal for ESG investors.

The fund charges a 0.15% expense ratio, which is competitive in its category. This low fee and the fund’s broad and diversified portfolio should preserve its performance advantage over the category average. Its ESG tilts have not been a major performance driver and will likely remain so.

Analyst Rating

A well-diversified broad-market fund with basic ESG screens.

Analyst

Lan Anh Tran

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Eli Lilly

JPMorgan Chase & Co

UnitedHealth Group

Broadcom

The fund incorporates ESG criteria while retaining the benefits of a broadly diversified and low-turnover portfolio, earning a High Process rating.

High

Process

BlackRock's industry-leading technology, global footprint, and extensive supporting cast earn an Above Average People Pillar rating. The team employs BlackRock's Aladdin platform to fulfill much of its portfolio management tasks, and global trading desks allow traders to conduct foreign transactions in a cost-effective way.

The iShares index equity team has endured some internal turnover at the top over the past few years. But index-tracking performance should remain tight, thanks to heavily automated processes, a large team of seasoned professionals and several long-tenured managers that remain at the helm. Amy Whitelaw left the team in February 2023 for another role within the organization. Paul Whitehead replaced Alan Mason as a manager in January 2022, when Mason left to focus on the firm's customized institutional indexing capabilities. The broader index equity group, co-headed by Jennifer Hsui and Paul Whitehead, will continue to oversee iShares equity ETFs.

These managers interact with a wider team of traders and managers around the globe to execute the fund's day-to-day operations. The larger number of managers also limits the impact of personnel turnover when it does occur.

Above Average

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares MSCI USA ESG Optimized ETF

ESGU tracks an index composed of US companies that are selected and weighted for positive environmental, social and governance characteristics.

California Water Service Group

Procure Disaster Recovery ETF

KraneShares Global Carbon ETF

NEXTracker Inc

Invesco Water Resources ETF

Sterling Construction

Invesco Solar ETF

Rising global warming and its adverse impact on Earth makes it important for investors to be socially responsive while creating their investment portfolio. While these stocks and ETFs should gain, rising natural disasters should also boost businesses of disaster recovery stocks.

Protect Our Earth With 5 ETF & Stock Investing Strategies (Revised)

Protect Our Earth With 5 ETF & Stock Investing Strategies

Blackrock Flexible Income ETF

Grayscale Bitcoin Trust

iShares Bitcoin Trust

iShares Core Total USD Bond Market ETF

iShares Core S&P 500 ETF

iShares S&P 500 Growth ETF

iShares National Muni Bond ETF

Invesco National AMT-Free Municipal Bond ETF

iShares MSCI USA Quality Factor ETF

SPDR S&P 500 ETF Trust

iShares Treasury Floating Rate Bond ETF

U.S. Weekly FundFlows Insight Report: Equity ETFs Attract Largest Weekly Net Inflows Since Dec. 20, 2023 For Fund Flows Week

The iShares ESG Aware MSCI USA ETF (ESGU) made its debut on 12/01/2016, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth category of the market.

Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?

FlexShares STOXX US ESG Impact Index Fund

iShares MSCI EM ESG Optimized ETF

Xtrackers S&P 500 ESG ETF

iShares ESG MSCI USA Leaders ETF

iShares ESG Advanced MSCI USA ETF

While 2023 proved to be a challenging year for US sustainable funds including ETFs, the underlying principles of ESG investing remain relevant and are increasingly being incorporated into mainstream investment strategies.

US Sustainable ETFs Face Record Outflows in 2023: Here's Why

iShares ESG Aware MSCI USA ETF is a passively managed fund that follows an ethical investing approach. The sector breakdown is very close to the S&P 500 index, as well as valuation and growth metrics. Quality looks better. The fund has shown similar performance and risk metrics to the S&P 500 since inception. It has moderately lagged other ESG ETFs in the last 3 years.

ESGU Chooses Ethics Without Adding Risk

SPDR S&P 500 ESG ETF

iShares Climate Conscious & Transition MSCI USA ETF

Bull vs. Bear is a weekly feature where the VettaFi writers' room takes opposite sides to debate controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play either angle. For this edition of Bull vs.

Bull vs. Bear: ESG ETFs, the Post-Hype Sleeper?

First Trust Dow Jones Internet Index Fund

First Trust Nasdaq Semiconductor ETF

First Trust Dorsey Wright Focus 5 ETF

iShares Nasdaq Biotechnology ETF

iShares S&P 100 ETF

iShares PHLX Semiconductor ETF

Financial Select Sector SPDR Fund

Technology Select Sector SPDR Fund

SPDR SSGA U.S. Sector Rotation ETF

Even with $2.4 trillion in ETF assets spread across more than 400 ETFs, there's a pending offering from BlackRock that caught my eye. Before I lose you, dear reader, I'm not talking about the hopefully soon-to-be-approved iShares Bitcoin Trust.

A Pending BlackRock ETF to Watch

Vanguard Total Bond Market ETF

iShares MSCI Emerging Markets ETF

iShares Edge MSCI Min Vol Emerging Markets ETF

iShares 20+ Year Treasury Bond ETF

Vanguard S&P 500 ETF

Vanguard Total Stock Market ETF

Wall Street has been upbeat in the year-to-date frame as current stress in the market has been outweighed by superb gains in the first half.

ETF Asset Report YTD: S&P 500 Tops, ESG Loses

iShares ESG Aware MSCI USA ETF is not a very helpful fund in our opinion. The ESGU ETF closely matches the sectoral distributions and exposures of the iShares Core S&P 500 ETF, but levies higher expenses. There are economic concerns and reasons to worry about overall market valuations on top of the relative inefficiency of ESGU.

ESGU: No Value-Add, And ESG May Just Mean Executive Rents

iShares Core U.S. Aggregate Bond ETF

ASYMshares ASYMmetric 500 ETF

JPMorgan Equity Premium Income ETF

Asymmetric Smart Income ETF

Motley Fool 100 Index ETF

Motley Fool Capital Efficiency Index ETF

Motley Fool Next Index ETF

VictoryShares Free Cash Flow ETF

Asymmetric Smart Alpha S&P 500 Etf

On this episode of ETF Prime, VettaFi's Todd Rosenbluth reviewed the top five ETFs by flows in the first half of 2023 with host Nate Geraci. Darren Schuringa of ASYMmetric ETFs talked about the firm's Smart ETF suite, and Charly Travers of Motley Fool discussed portfolio management and their small-cap ETF.

ETF Prime: Todd Rosenbluth Looks Back on First Half's Top ETFs

Xtrackers MSCI USA Climate Action Equity ETF

Xtrackers MSCI USA ESG Leaders Equity ETF

This week, the iShares Climate Conscious & Transition MSCI USA ETF (USCL), a newly launched ESG ETF, saw strong net inflows from Ilmarinen, a Finnish insurance company. At the same time, an older ESG ETF, the iShares ESG MSCI USA Leaders ETF (SUSL), incurred a sizable redemption.

ESG ETFs Are Highly Liquid

JPMorgan BetaBuilders Europe ETF

iShares Russell 1000 Value ETF

Vanguard Information Technology ETF

The strong surge in mega-cap technology stocks has helped the Nasdaq composite post its strongest fund-flows week return since the week ended February 1. The preliminary flows figures through the first five months of the year show that equity funds (including ETFs) have handed back a net $77.5 billion. While we are not out of the woods yet, with just two days to spare, investors can finally cross off one of the more pressing issues from their list of worries after President Joe Biden signed the bipartisan debt ceiling bill on Saturday, June 3.

Tech Rally Attracts Interest In Select ETF Classifications

BNY Mellon Global Emerging Markets ETF

BNY Mellon Sustainable International Equity ETF

BNY Mellon Sustainable US Equity ETF

American Century Sustainable ETF

Vanguard ESG US Stock ETF

Franklin Liberty U.S. Core Bond ETF

Franklin Investment Grade Corporate ETF

JPMorgan Ultra-Short Income ETF

Putnam ESG Core Bond ETF

Putnam Sustainable Leaders ETF

Calamos Antetokounmpo Global Sustainable Equities Etf

Jpmorgan Climate Change Solutions ETF

Engine No. 1 Transform 500 ETF

This week, the VettaFi Voices addressed the topic of whether investors should use active or passive management for their ESG investing.

VettaFi Voices: Active or Passive Management for ESG ETFs?

SPDR Bloomberg 1-3 Month T-Bill ETF

iShares MSCI EAFE ETF

iShares iBoxx High Yield Corporate Bond ETF

iShares 7-10 Year Treasury Bond ETF

iShares iBoxx $ Investment Grade Corporate Bond ETF

iShares MBS ETF

Vanguard Short-Term Corporate Bond ETF

Trading activity on the Tradeweb European ETF marketplace reached EUR 59.2 billion in March, while the proportion of transactions processed via Tradeweb's Automated Intelligent Execution (AiEX) tool was 82.7%. Fixed income and commodity-based ETFs saw net buying in March, with ‘buys' surpassing ‘sells' by 10 and six percentage points, respectively.

Tradeweb Exchange-Traded Funds Update - March 2023

FlexShares US Quality Large Cap Index Fund

Invesco S&P 500 Quality ETF

iShares' QUAL fund may appeal to investors as banking risks linger.

ESGU Outflow May Reflect Rise of the Quality Factor

The label is spooking issuers and has investors running for the hills.

ESG Funds Could Face 'Tons of Closures'

ESGU follows a sector-neutral strategy designed to mimic the risk and return profile of the broader market. With $14 billion in assets, it's the largest ESG fund in the world. Still, the fund had $5 billion in outflows this month, leading all ETFs. Likely reasons are unclear investment objectives and relatively poor returns over the last three years.

ESGU: $5 Billion Outflow This Month Prompts ESG Skepticism

iShares U.S. Treasury Bond ETF

VanEck Mortgage REIT Income ETF

Schwab U.S. REIT ETF

ProShares Ultra VIX Short-Term Futures ETF

Vanguard Dividend Appreciation ETF

iPath S&P 500 VIX Short-Term Futures ETN Class A

Tried to buy a house lately? You wouldn't be the only one – despite buyers waving goodbye to 3% and even 4% mortgage rates that were available over the last three years or so, pending home sales have surged.

Equities ETFs Tumble, Real Estate ETFs Flow Back Up

PIMCO Active Bond ETF

SPDR DoubleLine Total Return Tactical ETF

WisdomTree Bloomberg Floating Rate Treasury Fund

In the latest episode of “Bloomberg's ETF IQ,” Bloomberg's Matt Miller, Katie Greifeld, and Eric Balchunas spoke with VettaFi's head of research Todd Rosenbluth, and BNY Mellon Investment Management's Stephanie Pierce about the latest in the banking sector.

Todd Rosenbluth Talks Ultra-Short ETFs, Active Management, and ESG on Bloomberg's “ETF IQ”

iShares JP Morgan USD Emerging Markets Bond ETF

iShares MSCI USA Momentum Factor ETF

iShares Short Treasury Bond ETF

During Refinitiv Lipper's fund-flows week that ended March 22, 2023, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the fourth week in a row, adding a net of $133.3 billion. Exchange-traded equity funds recorded $14.6 billion in weekly net inflows, marking the second weekly inflow in the last five weeks.

U.S. Weekly FundFlows Insight Report: Government-Treasury Funds Set New Weekly Record With $8.3 Billion In Inflows

Sometimes the facts can get in the way of an ETF narrative. I think that's what is occurring with the recent outflows to the iShares ESG Aware MSCI USA ETF (ESGU).

A Shift to Quality Is Not a Political Statement on ESG but the Market

The top ETF issuer's CEO address steers clear of ESG terminology, but the firm isn't giving up on sustainable investing.

BlackRock's Fink Reframes ESG in Annual Letter

Socially responsible ETFs like ESGU may benefit with more government spending.

ESG Investing's Benefits, Baggage

Sustainable funds in the U.S. shed $6.2 billion in the last quarter of 2022.

ESG ETFs Buffeted by Volatile Politics and Markets

News for iShares MSCI USA ESG Optimized ETF ETF (ESGU)