ESGU vs RAFE

ESGUAiShares ESG Aware MSCI USA ETF

RAFEBPIMCO RAFI ESG U.S. ETF

In short

ESGU Screening out companies is easy; keeping the market's shape while you do it is the hard part. ESGU's index optimizes toward stronger ESG characteristics while targeting risk and return similar to the broad MSCI USA Index.

RAFE Most ESG index funds rescreen a familiar large-cap benchmark and weight it by market value. RAFE runs PIMCO's RAFI rules instead: a long-only, rules-based blend of ESG screening and smart beta, landing on roughly 240 US stocks.

Stated mandate

ESGU Seeks to track an index of large- and mid-cap U.S. companies selected for favorable environmental, social and governance (ESG) characteristics while seeking risk/return similar to the MSCI USA Index.

RAFE The fund seeks total returns closely corresponding to the RAFI ESG US Index by investing at least 80% of assets in its component securities. The index uses a long-only, rules-based ESG and smart-beta approach.

Why people hold it

• ESGU Not a screen-and-drop portfolio: the index optimizes toward better ESG characteristics while targeting risk and return similar to the broad MSCI USA Index.ishares.com
• 0.15% a year, below the typical fund in its US ESG group, spread across roughly 300 large- and mid-cap names rather than a narrow shortlist.
• Running since 2016, a multi-billion-dollar iShares fund that pays quarterly and sits in the top quartile of a crowded US ESG peer group.

• RAFE Different engine from the cap-weighted crowd: the RAFI ESG US Index sets both the screens and the weights by rule, and the fund keeps at least 80% of assets in those index names.
• It has tracked its index very closely since launch, which is the core job of any index fund and the main thing you are paying for here.
• Roughly 240 stocks is a tighter roster than the 500-name screened index funds that dominate this shelf, so the rules actually show up in the portfolio.
• Live since 2019 under a standard 1940 Act fund wrapper, all-US equity, with cash paid out on a quarterly schedule.

Worth knowing

• ESGU Cheaper seats in the same row: XVV at 0.08%, ESGV at 0.09%, SNPE and EFIV at 0.10%, against 0.15% here.
• Market-like risk is the stated goal, so exclusions are lighter than a purist ESG fund and the holdings end up looking a lot like the broad US market.ishares.com
• MSCI's ratings decide who makes the cut, so the portfolio reflects one provider's definition of ESG, not an industry standard.ishares.com

• RAFE The rules cost money: 0.30% a year against a 0.25% cohort median, while cap-weighted ESG rivals like ESGV, XVV and SNPE sit near or below 0.10%.
• It is a small, thinly traded fund by category standards, so the spread at the moment you trade matters more than it would in a mega-cap ESG index fund.
• The ESG definition is the index provider's, not yours: inclusion follows RAFI ESG US Index rules, so check the methodology against what you actually want screened.

Full ESGU profile⁠

Full RAFE profile⁠