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.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Blackrock. ESGU has been able to amass assets over $13.29 billion, making it one of the largest ETFs in the Style Box - All Cap Growth. Before fees and expenses, ESGU seeks to match the performance of the MSCI USA ESG Focus Index.
The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for ESGU are 0.15%, which makes it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.14%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
ESGU's heaviest allocation is in the Information Technology sector, which is about 32.20% of the portfolio. Its Financials and Healthcare round out the top three.
When you look at individual holdings, Apple Inc (AAPL) accounts for about 6.66% of the fund's total assets, followed by Nvidia Corp (NVDA) and Microsoft Corp (MSFT).
Its top 10 holdings account for approximately 32.18% of ESGU's total assets under management.
Performance and Risk
Year-to-date, the iShares ESG Aware MSCI USA ETF has lost about -0.06% so far, and is up roughly 13.32% over the last 12 months (as of 05/14/2025). ESGU has traded between $108.06 and $134.30 in this past 52-week period.
The fund has a beta of 1.03 and standard deviation of 18.35% for the trailing three-year period. With about 289 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares ESG Aware MSCI USA ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard ESG U.S. Stock ETF (ESGV) tracks FTSE US ALL CAP CHOICE INDEX and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) tracks ----------------------------------------. Vanguard ESG U.S. Stock ETF has $10.13 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $25.07 billion. ESGV has an expense ratio of 0.09% and JEPQ charges 0.35%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Growth.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Vanguard ESG U.S. Stock ETF (ESGV): ETF Research Reports
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
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