Ethical and ESG ETFs Australia: ETHI, FAIR and How the Screening Works (2026)

Last updated: Q2 2026. Figures are computed from ETFLens data as at Q2 2026, sourced from each issuer's published disclosure documents and reviewed quarterly.

Ethical investing has grown quickly into a substantial corner of the Australian ETF market, and there are now several ways to build a portfolio that reflects environmental, social and governance (ESG) preferences without picking individual stocks. This guide on ethical and ESG ETFs Australia explains what the labels actually mean, what the main funds hold, how to check a fund for greenwashing, and how these funds fit alongside a broad portfolio.

What is an ethical or ESG ETF?

An ethical or ESG ETF is a fund that applies environmental, social and governance rules to decide what it will and will not hold. Instead of tracking every company in an index, it applies a set of screens. There are two broad approaches, and most funds use a mix of both.

Negative screening (exclusions)

Negative screening starts from a broad market and removes companies involved in activities the fund's methodology excludes: commonly fossil fuels, tobacco, controversial weapons, gambling and, in some funds, alcohol or uranium. What is excluded varies from fund to fund, which is why two sustainable funds can look quite different once you read the detail.

Positive or leaders-based screening

Positive screening goes further and favours companies that score more highly on sustainability measures within their industry. Some funds combine the two: they exclude the worst activities and then tilt towards higher-rated companies. The exact rules are set out in each issuer's methodology document, not in the fund's name.

One important distinction: ESG screening is not the same as thematic investing. A clean-energy or battery-technology fund is a concentrated bet on a single sector, while a broad ESG fund still aims for diversified exposure, just with certain companies screened out.

The main ethical and ESG ETFs on the ASX

A handful of funds make up most of the ethical ETF money in Australia. These are listed for information only and not as a recommendation:

• ETHI (Betashares Global Sustainability Leaders) holds a screened basket of large global companies, charging 0.59% p.a. with a fund size of approximately $3.6B. It is one of the most widely held ethical ETFs on the ASX.
• FAIR (Betashares Australian Sustainability Leaders) applies a similar screen to Australian companies, charging 0.49% p.a. with a fund size of approximately $1.1B.
• DBBF (Betashares Ethical Diversified Balanced) is an all-in-one ethical fund that blends screened shares and bonds in a single ticker, charging 0.39% p.a..
• GOOD (Janus Henderson Sustainable Credit) is a fixed-income option that applies sustainability screens to bonds rather than shares, charging 0.5% p.a..

You can see the full ESG category, sorted by fee and fund size, on the ETFLens screener.

How to check what an "ethical" fund actually holds

This is the single most useful habit for ethical investors, because the label on the tin does not tell you what is inside. Two funds can both describe themselves as sustainable and still hold different companies, because they apply different screens. ASIC has taken enforcement action over misleading sustainability claims, so reading the detail matters.

ETFLens is independent and takes no money from any fund issuer, so its ETF pages show each fund's actual top holdings, sectors and geography straight from the issuer's disclosure, not a marketing summary. Before buying an ethical ETF it is worth doing two things: read the fund's screening methodology on the issuer's site, and check the holdings so the fund matches what you expected. If you are weighing up two ethical funds, the overlap checker shows how many of the same companies they hold, so you can see whether holding both adds diversification or just doubles up.

Fees: what ethical ETFs cost

Screening adds research, so ethical ETFs generally charge more than a plain index fund. ETHI charges 0.59% p.a. and FAIR 0.49% p.a., compared with around 0.07% for a broad Australian shares fund like VAS. That fee gap is a real, ongoing cost that compounds over time; you can model it on the Fee Analyser. Whether the screening is worth the extra fee is a personal judgement ETFLens cannot make for you.

How ethical ETFs fit a portfolio

For many investors an ethical ETF plays the same role a broad fund would, just with certain companies screened out: a global fund like ETHI can sit in the international part of a portfolio and an Australian fund like FAIR in the home-market part. Because the screens change which companies are held, an ethical fund's returns will differ from a broad index over time in both directions, and past performance is not a reliable indicator of future returns. Whether an ethical ETF suits your objectives, and in what proportion, depends on your circumstances, which ETFLens cannot assess. If you are still deciding how to get started, see our guide on how to invest in ETFs in Australia.

This article is general information only and not personal financial advice. ETFLens does not hold an Australian Financial Services Licence (AFSL). Consider your own objectives, financial situation and needs, or speak with a licensed financial adviser before making investment decisions. Past performance is not a reliable indicator of future returns.