The Invesco MSCI Sustainable Future ETF (ERTH) seeks to track the MSCI KLD 400 Social Index, which measures the performance of companies with strong environmental, social, and governance (ESG) practices while excluding controversial business activities like tobacco, weapons, and fossil fuels.
How It Works
ERTH uses a passively managed, market-capitalization-weighted approach that mirrors its ESG-focused benchmark index. The fund holds approximately 400 U.S. companies that pass MSCI's sustainability screening criteria, automatically excluding firms involved in controversial industries. Rebalancing occurs quarterly to maintain index alignment and ESG compliance. The strategy emphasizes companies demonstrating strong environmental stewardship, social responsibility, and corporate governance practices.
Key Features
- Focuses exclusively on companies with proven ESG credentials, automatically screening out tobacco, weapons, and fossil fuel industries
- Tracks one of the oldest and most established ESG indices, providing 15+ years of performance history
- Offers 1.10% dividend yield from sustainable companies while maintaining broad U.S. market diversification across sectors
Risks
- This ETF can lose value if ESG-focused companies underperform traditional markets, as sustainable investing may sacrifice returns during certain periods
- Sector concentration risk exists as ESG screening excludes entire industries, potentially missing profitable opportunities in energy or defense sectors
- Market volatility affects this fund like any equity ETF, with potential 20-30% declines during bear markets despite ESG focus
Who Should Own This
Best suited as a core equity holding (30-50% allocation) for values-driven investors with 5+ year time horizons seeking ESG-compliant U.S. market exposure. Medium-to-high risk tolerance required for equity volatility. Ideal for socially conscious investors prioritizing sustainable investing principles over maximum returns.