There's a new federal government, in case you haven't heard, and talk of the town is that it could be a positive for those ASX companies tied up in the renewables space.

New Prime Minister and Labor leader Anthony Albanese has promised a 43% reduction in carbon emissions by the year 2030 relative to 2005 levels.

With that backdrop in mind, it's prudent to check in and see how ASX renewable energy shares have tracked in May.

Green shares are in the red

Whilst there's no specific set of indices covering the ESG or renewables segment in Australia, ETFs tracking the sector have stumbled hard in 2022.

The Vaneck MSCI Australian Sustainable Equity ETF (ASX: GRNV) has fallen around 6% this month and is down 12% this year to date.

Whereas the Russell Investments Australian Responsible Investment ETF (ASX: RARI) slipped by roughly half that amount in May.

On the individual level, renewable energy players such as Infratil Ltd (ASX: IFT) have taken a knock in May, trading 3% down month to date.

Meanwhile, other tickers in the space including Genesis Energy Ltd (ASX: GNE) and Hazer Group Ltd (ASX: HZR) have slipped by 5% and 13% this month to date respectively.

It's all relative though, as Einstein might say. Comparing to the S&P/ASX 200 Index (ASX: XJO), each of these names – plus ETFs tracking the sector – are trailing the benchmark.

The month to date returns for May in each of these vehicles are plotted on the chart below.

The post How have ASX renewable energy shares been performing in May? appeared first on The Motley Fool Australia.

Commodity markets are booming in 2022 amid a wave of catalysts. Turns out, that's been equally as harsh for ESG and ethically focused share baskets.

As a sector – which is still poorly defined on Australian public markets, mind you – renewables have lagged other segments such as financials, utilities and materials this year.

How can we tell? Whilst there's no specific ASX renewables index, EFTs tracking the segment have crept downwards this year, as is shown further below.

Evidently, as markets have endured volatility in 2022, that's translated to a fairly strong headwind for ASX renewables shares, and at the end of the day, the sector is in the red in 2022.

Nonetheless, scaling back to the start of the year, some names have absorbed losses better than others. Let's take a look at those.

'Green' shares aren't in the green

Unfortunately, on an individual stock level, what we define as a 'renewables' share is quite narrow. Actually, there are no real winners per se, but some shares absorbed selling pressures better than others.

Let's talk in terms of energy first and, with that, results aren't good.

Renewables investor Infratil Ltd (ASX: IFT) is down 2.45% year to date but has whipsawed higher over the past three months. Although, its price chart looks like a 9.0 scale reading on the Richter scale.

Meanwhile, Genesis Energy Ltd (ASX: GNE), owner of a diverse portfolio of thermal and renewable generation assets located in different parts of New Zealand, has slipped 3.3%.

Trends are similar across the board and it appears any capital that's left the sector has been shipped straight across to the adjacent resources, traditional energy, and wider commodities segments.

Alas, it's no better for the exchange-traded funds (ETFs), with the Vanguard Ethically Conscious International Shares INDEX ETF (ASX: VESG) creeping down by 13%.

Meantime, the VanEck MSCI Australian Sustainable Equity ETF (ASX: GRNV) has fallen by more than 5% and is in a similar vein to the product above.

Finally, the Russell Investments Australian Responsible Investment ETF (ASX: RARI) has crept up hard in 2022 and is 4 basis points higher in that time.

It's important to zoom out

Longer term – since last January to be specific – the picture's a bit different. Three of the four securities have remained buoyant over that time, albeit Genesis Energy, which slipped more than 21% into the red.

The VESG ETF seems to have outperformed this bunch and was the star player until volatility crept in this year and it has since consolidated returns.

It has now levelled off and is rangebound alongside the fellow MSCI Australian Sustainability ETF from VanEck.

That's something to think about.

The post Here are the best ASX renewables shares of the year so far appeared first on The Motley Fool Australia.

Last week, we discussed how the ethical investing trend is taking off in the ASX exchange-traded fund (ETF) sector. ESG (environmental, social and corporate governance) investing has grown in scope and scale as more and more investors want to put their money where their values lie. Of course, you can sniff out individual companies that might align with your values. But many investors are using ETFs to do this legwork for them, as well as taking advantage of the diversification and passivity that an ETF can offer.

Breaking down an ESG ETF

When it comes to ethical ESG ETFs, there are normally two classes that a fund will fall into. There are funds that follow a broad market index, such as the S&P/ASX 200 Index (ASX: XJO), but then 'filter' out any unsavoury companies from the index. And then there are those that invest in a particular ESG-aligned industry, such as renewable energy. There is a big difference between these two approaches.

Let's first look at the index funds. The BetaShares Australian Sustainability Leaders ETF (ASX: FAIR) is one such fund. This ETF tracks an index that screens ASX companies based on ESG criteria such as fossil fuel production, gambling, tobacco, alcohol, environmental destruction and animal cruelty. It holds 80 ASX shares, which includes some big names like Telstra Corporation Ltd (ASX: TLS), CSL Limited (ASX: CSL) and Xero Limited (ASX: XRO). As such, you are still getting some of the diversification benefits a simple ASX 200 index fund might provide, but without the companies that have been identified as not possessing ESG characteristics.

There are other ASX ESG ETFs that follow a similar methodology. The Vanguard Ethically Conscious Australian Shares ETF (ASX: VETH) is one. The VanEck Vectors MSCI Australian Sustainable Equity ETF (ASX: GRNV) is another. There are even funds available that take this approach and apply it to overseas shares instead of ASX companies. Such funds include the VanEck Vectors MSCI International Sustainable Equity ETF (ASX: ESGI) and the BetaShares Global Sustainability Leaders ETF (ASX: ETHI).

What about sector-specific ETFs?

That's only one side of the ASX ethical ESG ETF coin though. There are also a number of funds out there that chase specific ESG sectors. Take the ETFS Battery Tech & Lithium ETF (ASX: ACDC). This fund aims to give exposure to "the energy storage and production megatrend, including companies involved in the supply chain and production for battery technology and lithium mining."

Whilst this fund does not have a specific ESG mandate, it is still focused on an industry with 'green' credentials in aiming to reduce greenhouse gas pollution. However, a fund like this arguably provides less diversification than one of the funds named above. That's because all of the holdings in this ETF are companies that operate in a very specific sector.

The same can be said of the VanEck Vectors Global Clean Energy ETF (ASX: CLNE) or the BetaShares Climate Change Innovation ETF (ASX: ERTH).

Whilst there is nothing wrong with this approach, it's worth pointing out that there is a lot more concentration on one particular section of the ESG market. This carries its own set of risks compared to a more diversified fund.

Foolish takeaway

Ethical ESG investing looks as though it's here to stay as an investing trend. But if you are seeking out ESG funds to invest in, make sure you know what kind of exposure you are looking for. Not all ethical ETFs are equal — some of these funds might be offering a portfolio that's too concentrated for your goals, or risk profile. Just because something has 'ESG' or 'ethical' doesn't mean it's automatically a good investment.

The post An ASX investor's guide to ESG-focused ETFs appeared first on The Motley Fool Australia.

Ethical investing. It's an interesting concept, but is it achievable?

Every person is different and what we deem to be 'ethical' may vary. However there are some common themes in the investing world that are deemed 'unethical'.

What is deemed 'unethical'?

Generally speaking, unethical investments could be deemed as ones that involve some or all of the following categories:

• Fossil fuels such as oil and gas
• Gambling
• Alcohol
• Tobacco
• Nuclear power
• Civil or military weapons
• Adult entertainment
• Anything that destroys the environment
• Animal cruelty

That's a big list! 

I would argue that most people are good people. Just because you hold an investment in one of these sectors, this doesn't mean your moral compass is broken. Personally, I buy companies in some of these categories and don't have too much of an issue with it. Of course, I still consider myself a good person. It's really a question of what is good for you personally. If you're generally interested in ETFs, but not too concerned about ensuring all your money goes towards ethical investments, then check out this list of top ETFs.

Some people, however, simply can't live with themselves knowing they have financially contributed to what they consider unethical practices, even if it's indirectly. If you are one of those people, I have good news for you. There are a number of exchange-traded funds (ETFs) that have you covered. The managers of these funds have set up specific criteria to select companies that avoid 'unethical' categories.

Here are some options for ethical investing:

VanEck Vectors MSCI Australian Sustainable Equity ETF (ASX: GRNV)

This ETF is designed to give investors access to a range of Australian sustainable companies.

Materials is the largest sector holding here, weighing in at 22.7%, with financials coming in second at 18.5%.

According to VanEck, this ETF holds companies that have a high level of environmental and social governance (ESG) and relies on the following guiding principles:

• It excludes companies that own any fossil fuel reserves or derive revenue from mining thermal coal or from oil and gas related activities.
• It excludes companies with business activities that are not socially responsible investments (SRI).
• It targets companies with high ESG ratings.

The fees are low at 0.35% per year. Performance wise, the fund is actually down around 9% since inception. On a positive note, it has performed well since the March crash, rising more than 35% in the last 6 months. Dividend returns are quarterly and currently sit at around 4% to 5% return. Detailed information can be found here.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

This ETF holds global companies that have been identified as 'climate leaders'. 

The largest sector holding is information technology, sitting at around 38%.

Using the fund manager's methodology, we can see themes such as these ones governing the ethical investing inclusion process:

• It excludes those companies involved in firearms, environmental destruction or animal cruelty.
• It excludes companies with fines or convictions and those with human rights concerns.
• These climate change leaders must have a carbon impact of at least 60% less than their industry average.

One thing to note here is that the fees are a little high, being 0.59% per year. Although, personally, I don't think this is too bad. Fund performance is up more than 60% since inception. Over the last 6 months, it has returned around 15% to investors. Dividend returns are 6 monthly and have been as high as 12.80% recently according to the provider's performance reports.

Vanguard Ethically Conscious International Shares Index ETF (ASX: VESG)

This fund holds some of the largest companies in major developed countries. Finding an ETF that hits all the points we discussed earlier is hard, however, this one certainly tries.

Technology companies make up the largest sector holding at around 26%.

It excludes companies with the following business activities:

• Fossil fuels
• Nuclear power
• Alcohol
• Tobacco
• Gambling
• Weapons
• Adult entertainment
• Conduct related to severe controversies

One thing I like about this fund is the low management fee. At just 0.18%, it's very competitive in the ETF market. Performance wise, it has returned around 16% since inception. It also rebounded well from the market crash in March. Dividends are paid quarterly and are currently sitting at around a 1.9% to 2% return. A fact sheet can be found here.

Foolish takeaway

Ethical investing can be difficult when there are so many opportunities in the market. At the end of the day, though, these funds and the companies they hold are helping to make the world a better place so I feel they are worthy of consideration.

The great thing about ETFs is that you gain diversity to sectors and industries that interest you. Adding these ethically conscious ETFs to your portfolio may just be the balance and peace of mind you are seeking.

The post Interested in ethical investing? Look at these 3 ETFs appeared first on The Motley Fool Australia.