Hi Brice,
On the one hand I am impressed by the amount of research you put on this subject, and thank you for sharing your insights.
On the other hand I am very mixed about all those ESG products, because I have a feeling that it is just a marketing scheme from the ETF industry to take advantage of retail investors not knowing the difference between primary and secondary market.
I get that you don’t want your money to go in the pocket of “bad” companies, and you’d prefer your money to have a better impact on the world. However, I am 99.99999% sure that all ETFs are exchanging shares on the secondary market, which reduces a lot the impact of your endeavour.
Primary market : This is when a company goes public (IPO) or when it needs to raise more capital by selling additional shares, offering issue rights or so on. The investor (let’s call him Bob) have to notify their brokers that he wants to participate in the capital raising or the IPO, and in this case Bob’s money goes directly to the company.
Secondary Market : At some point Bob does not want to owns the shares anymore and is willing to sell them. Another investor, Alice, is willing to buys the shares. The transaction happens on the stock exchange, Alice gets the shares and Bob the money, but nothing happens at the company’s level: Alice’s money does not go to the company, only in Bob’s pocket.
Most of the trading happens usually on the secondary market, and unless an ETF is participating in an IPO or a capital raise, I really doubt that ESG ETFs are having that much of an impact. On the other hand, they are more expensive. And the combination of higher fees/no real impact is not a winning one in my eyes.
If you really want to have an ESG impact while investing, I would suggest that you try to compound your wealth as quick as possible (and VT/VTI is a proven recipe for this), and then make regular donations to a charity that matters to you. This would have much more impact than buying an ESG ETF.