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When ethical ETFs aren't ethical

The number of sustainable ETFs is growing, but check exactly what you are buying

Exchange traded fund (ETF) options for investors interested in ethical investing are growing, most recently with the launch of two sustainable ETFs by iShares. But before you invest in an ethical ETF you should know what you are buying because an index provider's definition of what is ethical might not be the same as yours. And if you hold a synthetic ETF you might be holding stocks you thought were excluded.

Earlier this month, iShares launched iShares Sustainable MSCI Emerging Markets SRI UCITS ETF (SUSM) and iShares Sustainable MSCI USA SRI UCITS ETF (SUAS), taking the number of ethical ETFs on the London Stock Exchange to 18. But progress has been slow and, so far, iShares and UBS are the only providers to have made a real push into the area.

That could be partly due to the difficulty of defining what makes a socially responsible, or ethical, ETF.

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