Launched on 12/01/2016, the iShares ESG Aware MSCI USA ETF (ESGU) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $15.98 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.15% for ESGU, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.97%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 35% of the portfolio. Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Nvidia Corp (NVDA) accounts for about 7.64% of the fund's total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).
Its top 10 holdings account for approximately 37.1% of ESGU's total assets under management.
Performance and Risk
Year-to-date, the iShares ESG Aware MSCI USA ETF has added roughly 1.44% so far, and is up roughly 13.98% over the last 12 months (as of 01/27/2026). ESGU has traded between $108.06 $151.62 in this past 52-week period.
The ETF has a beta of 1.03 and standard deviation of 15.06% for the trailing three-year period. With about 284 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.
iShares ESG Aware MSCI EAFE ETF (ESGD) tracks MSCI EAFE ESG Focus Index and the Vanguard ESG U.S. Stock ETF (ESGV) tracks FTSE US ALL CAP CHOICE INDEX. iShares ESG Aware MSCI EAFE ETF has $11.22 billion in assets, Vanguard ESG U.S. Stock ETF has $12.02 billion. ESGD has an expense ratio of 0.21% and ESGV changes 0.09%.
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 ReportsThis article originally published on Zacks Investment Research (zacks.com).
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