Best Performing ESG ETFs for August 2025

Investors are increasingly considering ESG factors — environmental, social and governance principles — when they choose investments. And the number of ESG-focused options, including ESG ETFs, is growing.

What is an ESG ETF?

ESG funds are investments that are graded using ESG (environmental, social and governance) principles. ESG funds invest in companies that aim to have a sustainable and societal impact in the world, such as those with a small carbon footprint or diverse leadership boards.

ESG funds are not individual stocks. They are a collection of multiple stocks grouped together. Buying a fund rather than an individual stock can decrease risk since a fund holds shares of many companies rather than just one.

Exchange-traded funds (ETFs) are similar to index funds and other passively managed funds. The main difference is that ETFs can be traded throughout the day, similar to stocks.

Best-performing ESG ETFs

Some of the best ESG ETFs in 2025 based on recent data include:

• Franklin Responsibly Sourced Gold ETF (FGDL) with 41.57% return, notable among ESG ETFs focused on sustainable gold mining. 

• WisdomTree China ex-State-Owned Enterprises Fund (CXSE) with a 42.99% return (1 Yr) on NASDAQ.

• iShares ESG Aware MSCI Emerging Markets ETF (ESGE) with a 22.33% return (1 Yr). It provides ESG exposure to emerging markets while excluding controversial sectors and yields positive returns beating some emerging markets benchmarks this year. (morningstar) 

• iShares ESG Aware MSCI USA ETF (ESGU) with a 19.08% return (1 Yr). It is highly rated with a $13.37 billion AUM, tracking the MSCI USA Extended ESG Focus Index and focusing on excluding controversial sectors like tobacco and fossil fuels. It shows competitive multi-year returns near the broader market. (morningstar)

• Vanguard ESG US Stock ETF (ESGV) with a 19.95% return (1 Yr), also large with $10.16 billion AUM, tracks the FTSE USA All Cap Choice Index, emphasizing companies compliant with UN Global Compact principles, with a focus on technology stocks offering growth tilt. (morningstar) 19.95%

• Stance Sustainable Beta ETF (CHGX) with a 14.53% return (1 Yr). 

• Canadian-focused ESG ETFs like NBI Sustainable Canadian Equity ETF and Wealthsimple Developed Markets ex North America Socially Responsible Index ETF show strong performance and low fossil fuel exposure with high ESG ratings. (global.morningstar)

Expense ratios for leading ESG ETFs can be quite low, such as the TCW Transform 500 ETF (VOTE) at 0.05%, and Vanguard ESG U.S. Stock ETF (ESGV) at 0.09%, making them cost-effective options for ESG-conscious investors. (nerdwallet)

In Europe, there are also well-performing ESG and socially responsible ETFs, such as L&G Quality Equity Dividends ESG Exclusions Europe ex-UK UCITS ETF with over 26% returns recently. (justetf)

These ETFs generally exclude companies involved in severe controversies, fossil fuels, tobacco, controversial weapons, and adopt ESG integration or best-in-class screening strategies for responsible investing.

Key factors to consider when choosing the best ESG ETF in 2025 are:

• Performance relative to benchmarks

• ESG rating and screening methodology

• Expense ratio

• Market focus (US, Emerging Markets, Europe, Canada)

• Sector and company exclusions consistent with ESG values

This selection represents a cross-section of top-performing, well-regarded ESG ETFs available in 2025, suitable for investors seeking sustainable and responsible exposure with competitive returns.

ESG Mandate in ETFs

A key aspect of these top ESG ETFs is the incorporation of a clear ESG mandate within their investment strategies, which ensures a disciplined approach to sustainable investing. Incorporating an ESG mandate means embedding environmental, social, and governance factors deeply into the investment decision process alongside financial objectives, reflecting genuine sustainability goals rather than mere marketing. Key elements of an ESG mandate that these ETFs often follow include:

• ESG Integration: Systematically including ESG data and criteria in financial analysis and portfolio construction to manage risks better and uncover sustainable growth opportunities.
• Screening and Exclusions: Proactively excluding companies or sectors conflicting with ESG principles, such as tobacco, fossil fuels beyond defined thresholds, and controversial weapons.
• Regulatory Alignment: Following evolving regulations and frameworks like the EU Sustainable Finance Disclosure Regulation (SFDR), which requires at least 80% of investments to meet ESG criteria or sustainable investment objectives, along with necessary transparency to avoid greenwashing.
• Active Engagement: Engaging with companies to promote improved ESG practices and exercising shareholder voting rights in favor of sustainability resolutions.
• Climate Considerations: Setting explicit goals related to carbon footprint reduction or alignment with global climate targets such as the Paris Agreement.
• Transparency and Reporting: Committing to clear, measurable ESG objectives and regular disclosure to investors for accountability and comparability.

These ESG mandates are formalized in the fund's investment policies and require ongoing monitoring and reporting. By applying these mandates, ESG ETFs enable investors to align their portfolios with their ethical values while also targeting competitive financial returns. Many leading ESG ETFs in 2025 combine these mandates with strategies such as low tracking error approaches, thematic investments like clean energy, or net-zero emission pathways, offering a broad array of sustainable investment options.

ESG benefits

“Putting our investment dollars to work in ESG influences the behavior of the largest and most powerful multinational corporations in the world for the greater good of society," says Kenneth Chavis, a certified financial planner and senior wealth advisor at Versant Capital Management in Phoenix. “To me, this illuminates the breadth of power the everyday investor has, and is an excellent way to make a large-scale, meaningful difference,”

But if influencing powerful companies to make meaningful change isn't a good enough reason to invest with ESG principles, there's another reason: the potential for increased performance.

Morgan Stanley's most recent Sustainable Reality report shows that while ESG funds can sometimes underperform their traditional counterparts in the short term, long-term performance paints a bit of a brighter picture.

The report found that if you were to have put $100 into an ESG fund back in 2018, that investment would be worth $136 in 2024 [1]. On the other hand, if you had put that money into a traditional fund, the investment would be worth $131 — a slightly lower return.

How to choose the best ESG funds for you

Deciding you want to invest in ESG funds adds some extra considerations you may not have when picking more conventional funds.

1. Understand the difference between active and passive funds

Active and passive funds have different pros and cons. Make sure you know their differences before you dive in.

• Strategy. Actively managed funds try to beat stock market performance. This strategy may sound good in theory, but overall, actively managed funds often underperform their passive counterparts. According to the S&P Dow Jones Indices year-end scorecard, 65% of large-cap domestic equity funds underperformed the S&P 500 in 2024 [2]. Passively managed funds are also known as index funds because they are invested to reflect a specific market index, such as the S&P 500. These funds mirror the performance of the index they track.
• Cost. Keep in mind, higher fees can also negate higher returns. Many of the funds listed as "best overall" above are actively managed, whereas the funds on the low-cost list are passive. Actively managed ESG funds tend to be more expensive than passively managed funds, so if you’re looking to add sustainable investments to your portfolio with a smaller price tag, passively managed funds or ESG ETFs may be a better option.
• Availability. There are far more actively managed ESG funds than passively managed ESG funds, but passive funds are becoming more common. And while passive ESG funds have been growing in popularity, you’ll have more choices if you’re looking at active funds.

When choosing between active and passive funds, Chavis emphasizes that the decision depends on considerations such as your investment goals, your investing experience and your tax situation. He also recommends consulting an investment professional during this process.

2. Decide where you want to have an impact

In addition to checking expense ratios, make sure an ESG fund’s mission speaks to you. “An investor should look for an ESG fund that is in alignment with their goals. Let’s say social impact is of the utmost importance to you, specifically regarding diversity, equity and inclusion initiatives. You should seek a fund that rewards, in investment dollars, companies for high diversity, equity and inclusion scores on their boards, executive teams and with their employment practices,” says Chavis.

Think about whether there are particular missions you’d like to support with your investment dollars, such as clean water, renewable energy or women in leadership. If there’s an impact area that’s really important to you, that may outweigh a slightly higher expense ratio.

3. Consider your existing investments

Before adding any new investments to your portfolio, think about how an ESG fund would fit in. Be sure you're not overinvesting in a particular industry or asset class.

4. Understand your ESG fund’s impact

Maybe you’ve added a few ESG funds to your portfolio. So how do you know if those investment dollars actually made a difference?

“What I would look for, and what investors should insist upon, is an impact report,” says Jon Hale, the former Global Head of Sustainability Research at Morningstar. “That will give you a way to assess the impact of a fund as an investment. Impact reports talk about things like shareholder engagement, or the portfolio’s carbon footprint or gender diversity on the Boards of the companies held. That’s a good way to gain a sense of what impact you’re having as an investor.”

ESG funds may periodically release an impact report, or you can probably request one from the fund managers.

References

1. Morgan Stanley Institute for Institute for Sustainable Investing. Sustainable Reality.
2. S&P Dow Jones Indices. SPIVA® U.S. Scorecard. Accessed 5 Jun 2025.
3. https://etfdb.com/compare/highest-5-year-returns/
4. https://www.nerdwallet.com/article/investing/best-esg-funds
5. https://www.morningstar.com/sustainable-investing/five-top-esg-etfs-us-investors
6. https://www.homaio.com/post/sustainable-etfs-how-to-invest-in-responsible-funds-in-2025
7. https://www.justetf.com/en/market-overview/the-best-etfs.html
8. https://global.morningstar.com/en-ca/sustainable-investing/amid-tough-market-top-4-esg-etfs-canadian-investors-are-outperforming
9. https://www.trackinsight.com/de/etf-news/top-10-best-esg-etfs-understand-esg-scores
10. https://drwealth.com/best-esg-etfs/
11. https://www.justetf.com/en/how-to/invest-in-social-responsibility-europe.html
12. https://www.sganalytics.com/blog/best-esg-investment-funds/
13. https://etfdb.com/esg-investing/environmental-issues/