iShares ESG Select Screened S&P 500 ETF (XVV) seeks to track the S&P 500 ESG Select Screened Index, which measures the performance of large-cap U.S. stocks after excluding companies involved in controversial business activities like tobacco, weapons, and fossil fuels while maintaining similar sector weightings to the standard S&P 500.
How It Works
XVV uses a passively managed, market-capitalization-weighted approach that mirrors its ESG-screened benchmark index. The fund excludes approximately 150-200 companies from the S&P 500 based on ESG criteria, then reweights remaining holdings to maintain sector neutrality relative to the parent index. Rebalancing occurs quarterly to reflect index changes and maintain ESG compliance. The portfolio typically holds around 300-350 large-cap U.S. stocks with similar sector allocations to the broader S&P 500.
Key Features
- Maintains S&P 500-like sector exposure while excluding controversial industries, offering ESG investing without significant style drift
- Zero expense ratio makes it one of the lowest-cost ESG ETFs available, eliminating annual fees entirely
- Launched by BlackRock in 2020 but shows minimal assets under management, indicating limited investor adoption despite cost advantage
Risks
- This ETF can lose value if excluded ESG companies outperform included ones, creating performance drag versus the standard S&P 500 index
- Low assets under management may result in wider bid-ask spreads and potential liquidity issues during volatile market conditions
- Large-cap U.S. stock concentration means the fund could decline 20-30% during broad market downturns, similar to S&P 500 performance
Who Should Own This
Best suited as a core equity holding (30-60% of stock allocation) for ESG-conscious investors with 5+ year time horizons seeking large-cap U.S. exposure. Medium risk tolerance required due to equity volatility. Appeals to investors wanting S&P 500-like returns while avoiding controversial sectors, though limited liquidity may favor larger account sizes.