Best Ethical ETFs in Australia for 2026

The best ethical ETFs in Australia right now are BetaShares ETHI, BetaShares FAIR, and Vanguard VESG — each offering ESG-screened exposure with genuine liquidity on the ASX. The right pick depends on whether you want global or domestic shares, and how tightly you want to cap management costs.

General information only. This article does not constitute financial advice. Consider your own circumstances before making investment decisions.

What “Ethical” Actually Means in an ETF

Before picking a fund, it’s worth being clear about what ethical actually means here — because it’s not a regulated term in Australia. Most ESG ETFs apply negative screens, excluding companies involved in fossil fuels, tobacco, weapons, gambling or old-growth logging. Some go further with positive screens, weighting companies with strong ESG ratings more heavily.

Two funds can both call themselves ethical while holding very different companies. A quick check of the product disclosure statement and the underlying index methodology will tell you what’s actually excluded. Some “sustainable” funds still hold major banks with significant fossil fuel lending on their books — worth knowing before you commit.

BetaShares ETHI — Best for Global Ethical Exposure

ASX: ETHI | MER: 0.59% p.a.

ETHI tracks the Nasdaq Future Global Sustainability Leaders Index and holds around 200 large-cap global companies that pass a comprehensive ESG screen. It excludes fossil fuels, weapons, tobacco, gambling — and layers a climate impact screen on top.

The fund has attracted over $3 billion in assets under management, making it one of the most liquid ethical ETFs on the ASX. Its returns over recent years have been strong, largely because it’s heavily weighted toward US tech companies like Microsoft, Apple and NVIDIA, which consistently score well on ESG metrics. That concentration in tech is a feature for some investors and a risk for others.

At 0.59% p.a., it’s not the cheapest option in the space, but for the depth of screening applied, it’s a fair price.

BetaShares FAIR — Best for Australian Ethical Shares

ASX: FAIR | MER: 0.49% p.a.

If you want Australian equity exposure without the fossil fuel and weapons exposure, FAIR is the cleanest option on the ASX. It tracks the Nasdaq Australian Sustainability Leaders Index and holds around 70 ASX-listed companies that meet BetaShares’ criteria.

Importantly, FAIR excludes the big four banks — ANZ, Westpac, NAB and Commonwealth Bank — due to their significant fossil fuel lending books. This gives the fund a meaningfully different sector weighting from a standard Australian index: more healthcare and technology, far less resources and traditional financials. With roughly $700 million in AUM, it trades with solid daily liquidity.

FAIR works best paired with a global ethical ETF rather than held in isolation, given its concentrated domestic exposure.

Vanguard VESG — Best Low-Cost Global Ethical Option

ASX: VESG | MER: 0.18% p.a.

Vanguard’s VESG is the fee-conscious choice for investors who want global ethical exposure without paying a premium. It tracks the MSCI World ex-Australia ex-Fossil Fuels Screened Index and holds more than 1,400 companies across developed markets.

At just 0.18% p.a., it’s one of the cheapest ethical ETFs available on the ASX. The trade-off is a lighter ESG screen — primarily a fossil fuel exclusion rather than the broader multi-factor filter ETHI applies. If your main concern is climate exposure, VESG handles it efficiently. If you want a stricter ethical lens across weapons, tobacco and gambling as well, ETHI is more thorough.

VESG suits investors who already hold a Vanguard core portfolio and want to shift toward ethical without a full restructure.

Vanguard VETH — Domestic Ethical at the Lowest Cost

ASX: VETH | MER: 0.16% p.a.

VETH is Vanguard’s Australian ethical option, and at 0.16% p.a. it’s the cheapest ethical ETF for domestic equities on the ASX. It holds around 150 ASX-listed companies and applies the same fossil fuel screen as VESG — excluding the big four banks in the process.

For a long-term buy-and-hold investor who wants low-fee, locally-focused ethical exposure, VETH is hard to beat. The main limitation is the lighter screening methodology; if you want a stricter ESG process for Australian shares, FAIR goes further.

Frequently Asked Questions

Are ethical ETFs worth it compared to standard index ETFs?

For most investors the performance difference is small enough that it comes down to personal values. ETHI has outperformed the MSCI World index over several recent years, largely due to its tech weighting — though that same concentration adds risk. The honest answer is you’re not automatically sacrificing returns to invest ethically, but you are accepting different sector exposures and some concentration risk depending on which fund you choose.

How do I check what an ethical ETF actually holds?

Every ASX-listed ETF publishes its daily portfolio holdings on its own website. Go directly to the BetaShares or Vanguard product pages, download the holdings CSV, and check the top 20 positions. You can also look up the underlying index to understand exactly which screens are being applied before you put any money in.

Can I hold multiple ethical ETFs in the same portfolio?

Yes, and it often makes sense. Combining a domestic fund like FAIR or VETH with a global fund like ETHI or VESG gives you geographic diversification while keeping ESG screens across the full portfolio. Just watch for overlap — ETHI and VESG both hold many of the same global companies, so holding both adds limited extra diversification beyond what a single global ethical ETF already provides.