The iShares ESG Aware MSCI USA ETF (ESGU) was launched on 12/01/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $18.34 billion, making it one of the largest ETFs in the Style Box - All Cap Growth. Before fees and expenses, this particular fund 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.15%.
ESGU's 12-month trailing dividend yield is 0.91%.
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.
Representing 37.9% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Healthcare round out the top three.
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 7.45% of total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).
The top 10 holdings account for about 36.06% of total assets under management.
Performance and Risk
The ETF return is roughly 13.76% and was up about 24% so far this year and in the past one year (as of 08/06/2026), respectively. ESGU has traded between $137.39 and $169.10 during this last 52-week period.
The fund has a beta of 1.03 and standard deviation of 15.15% for the trailing three-year period. With about 281 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 Shares (ESGV) tracks FTSE US ALL CAP CHOICE INDEX. iShares ESG Aware MSCI EAFE ETF has $12.19 billion in assets, Vanguard ESG U.S. Stock ETF Shares has $13.59 billion. ESGD has an expense ratio of 0.20% 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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