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What is the Vanguard Ethically Conscious ETF (ASX:VETH)?

Let's get ethical… ethical…

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Mitchell Lawler
Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.
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Vanguard's Ethically Conscious Australian Shares ETF (ASX: VETH) is a diversified exchange-traded fund (ETF) that uses an ethical screen on the top 300 ASX-listed shares.

While the ETF underperformed the S&P/ASX 300 Index (ASX: XKO) in the past year, it still managed to deliver 15.3% before dividends.

So, let's grasp an understanding of what this ETF is exactly.

Envirosuite investor holds a tech device while sitting on a ledge looking out to trees through a window

Image source: Getty Images

Investing in ASX shares without the baggage

ETFs are a popular way for investors to gain exposure to a specific sector, index, or thematic in a single transaction. One increasingly popular thematic is ethical investing.

There are many options available when it comes to providers of ethical investing ETFs, however, today we're taking a look at Vanguard's Ethically Conscious Australian Shares ETF.

This one considers the top 300 companies listed on the ASX with an added filter. Specifically, the fund excludes companies with significant business activities involving fossil fuels, nuclear power, alcohol, tobacco, gambling, weapons, adult entertainment, and a conduct-related screen based on severe controversies.

As a result, the fund holds 238 ASX-listed companies with a median market capitalisation of $35.9 billion. According to the fund, the price-to-earnings (P/E) ratio of the ETF came to 20.5 times as at 31 May 2021.

Passive income investors would also be pleased to know that VETH ASX currently has a dividend yield of 2.6%.

What companies are in VETH ASX?

For most investors, you want to know exactly what is in the financial product your hard-earned dollars are going towards. For that reason, here are the top 10 holdings of the Vanguard Ethically Conscious Australian Shares ETF:

  1. Commonwealth Bank of Australia (ASX: CBA)
  2. CSL Limited (ASX: CSL)
  3. Westpac Banking Corp (ASX: WBC)
  4. National Australia Bank Ltd (ASX: NAB)
  5. Australia & New Zealand Banking Grp Ltd (ASX: ANZ)
  6. Wesfarmers Ltd (ASX: WES)
  7. Fortescue Metals Group Ltd (ASX: FMG)
  8. Macquarie Group Ltd (ASX: MQG)
  9. Telstra Corp Ltd (ASX: TLS)
  10. Transurban Group (ASX: TCL)

These top 10 holdings make up 48.9% of the total ETF. But how does VETH's top 10 differ from the unfiltered ASX 300? Well, the notable exclusions include BHP Group Ltd (ASX: BHP) and Woolworths Group Ltd (ASX: WOW).

However, the latter might be considered now that Woolies has demerged from its alcohol business, Endeavour Group Ltd (ASX: EDV)

Finally, one of the most important considerations for an ETF… the costs. Investors can expect a 0.16% per annum management fee in addition to 0.01% of indirect costs.

At the time of writing, the ASX-listed VETH is trading for $58.93 per unit.

Motley Fool contributor Mitchell Lawler owns shares of Commonwealth Bank of Australia and Macquarie Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited, Telstra Corporation Limited, and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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