Does Your Ethical ETF Hold Unethical Stocks?

Morningstar analysis has found a number of ethical and social ETFs own the very stocks they claim to exclude – and conscientious investors across Europe could be unaware

Kenneth Lamont 19 April, 2016 | 3:22PM

Morningstar analysis has found a number of ethical and social ETFs own the very stocks they claim to exclude – and conscientious investors could be in the dark about their holdings, amounting to hundreds of millions of pounds. This contradictory state of affairs is made possible by the use of synthetic replication.

To many ESG investors, this may feel like discovering meat in a vegetarian burger

Let us take the Amundi ETF MSCI World Low Carbon UCITS ETF (LWCU) as an example. The index it tracks screens all constituents of the MSCI World index and excludes those with the largest carbon footprint.

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About Author

Kenneth Lamont  is a passive funds research analyst for Morningstar Europe.

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