It’s been a tough market for sustainable investing in Canadian exchange-traded funds, but those struggles obscure the outperformance of the largest names.
These ETFs have underperformed the Canadian equity market this year, returning an average of 5.05% in 2025, compared with 8.09% for the Morningstar Canada Index. Over the past 12 months, the average 11.93% return on ETFs in our screen has also lagged the 23.53% gain on the broader market.
Meanwhile, the regulatory and corporate environment for sustainable finance in Canada has cooled, partly because of the backlash against sustainable investing in the United States. Canadian securities regulators are halting efforts to create widespread corporate sustainability reporting requirements in response to “recent developments in the US and globally.” RBC dropped a C$500 billion sustainable financing target, citing anti-greenwashing amendments to the Competition Act. Canadian shareholder activism on ESG issues may be chilling as well.
But the story has been good for investors in the largest sustainable stock funds. Here’s a closer look at these strategies.
Finding ESG ETFs
We focused on four Canadian ESG ETFs that are popular with investors. These funds are the largest in a screen of 84 vehicles, as measured by assets under management. Each fund has earned a Morningstar ESG risk rating from Above Average to High, indicating they’re successfully managing their financially material ESG risks. Each fund has also received a Low Carbon Risk Level Classification, meaning they’ve minimized material financial risk within their portfolios.
Screening Methodology
To define the parameters of our screen, we set filters on all ETFs in Morningstar Direct, selecting only those domiciled in Canada, traded on a Canadian exchange, and designated as equity products. Next we filtered for funds designated as ESG intentional investments overall. Lastly, we screened for funds with Morningstar Medalist Ratings of Bronze, Silver, or Gold, meaning we believe they will outperform over the long term.
Funds tagged as ESG intentional investments overall must “claim to have a sustainability objective, and/or use binding ESG criteria for their investment selection. Funds that employ only limited exclusions or only consider ESG factors in a non-binding way are not considered to be a sustainable investment product.” For more on our methodology, read here.
Each of the funds fall within a different Morningstar Category, from Canadian equity at the narrowest to global equity at the broadest. Notably, three of these funds—iShares ESG Aware MSCI Emerging Markets Index ETF, NBI Sustainable Canadian Equity ETF, and Wealthsimple Developed Markets ex North America Socially Responsible Index ETF—have outperformed the Canada Index in the year to date. Over the past year, these funds have also outperformed the Morningstar Global Markets Index.
iShares ESG Aware MSCI Emerging Markets Index ETF
Sitting atop our screen with C$S4.12 billion in assets under management is iShares ESG Aware MSCI Emerging Markets Index ETF. In the year to date, the fund has returned 8.90%, outperforming the Global Markets Index by 6.73 percentage points and the Morningstar Emerging Markets Target Market Exposure Index by 2.12 percentage points.
Launched in March 2019, this passively managed fund seeks to replicate the performance of the MSCI Emerging Markets Extended ESG Focus Index, which uses an “optimizer to maximize its exposure to stocks with high ESG ratings,” according to Morningstar manager research. Morningstar awards the fund an Above Average ESG Risk Rating. Morningstar Manager Research also found that the fund meets exclusions laid out in its prospectus for controversial weapons, tobacco, and thermal coal stocks.
Out of 343 total holdings, the fund’s largest positions are in Taiwan Semiconductor Manufacturing (9.99%) and Chinese internet player Tencent (4.60%).
NBI Sustainable Canadian Equity ETF
Second in our screen is the C$2.37 billion NBI Sustainable Canadian Equity ETF. Incepted in March of 2020, the fund has posted a strong year-to-date performance, generating a 10.63% return against a return of just 2.17% for the Global Markets Index and a return of 8.4% for the Canada index in 2025. The ETF has also posted the highest one-year return in this pool: 22.18%, nearly 9 percentage points higher than the Global Markets Index but 2.22 percentage points lower than the Canada Index.
NBI Sustainable Canadian Equity ETF is one of just two top four funds in our screen that are actively managed. The fund is also the only out of the top four to receive a High Morningstar ESG Risk Rating. In addition to achieving its commitment to exclude thermal coal, tobacco, and controversial weapons companies from its portfolio, Morningstar Manager Research finds that the fund’s “very low fossil fuel exposure over the past 12 months … earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy.”
With a concentrated portfolio of just 31 total holdings, Canadian dollar store chain Dollarama (5.83%) and Constellation Software (5.65%) dominate.
Wealthsimple Developed Markets Ex North America Socially Responsible Index ETF
The third-largest fund in our screen launched in June 2020. It has approximately C$867 million in assets under management and has returned 11.74% in the year to date, beating the Global Markets Index by over 9.50 percentage points but trailing the Developed Markets ex NA Index by 0.79 points.
This passively managed fund tracks the Solactive Wealthsimple Developed Markets ex NA Socially Responsible Factor Index. It has earned an Above Average ESG Risk Rating. The ETF delivers on its promise to maintain negligible exposure to companies associated with tobacco, controversial weapons manufacturing, and thermal coal.
The fund’s portfolio comprises 259 holdings, of which Japanese insurance provider Hikari Tsushin (1.93%) and European mine and smelter operator Boliden (1.85%) are weighted highest.
Wealthsimple North America Socially Responsible Index ETF
This fund, launched in June 2020, has approximately C$848 million in assets under management. Its year-to-date performance of 2.77% is 0.60 percentage points higher than return for the Global Markets Index and 4.27 points higher than the negative return for the Morningstar Developed Markets Americas Index.
The fund is passively managed and constructed to replicate the behavior of the Solactive North America Socially Responsible Factor Index. Morningstar has awarded the fund an Above Average ESG Risk Rating, finding that it abides by screens introduced in fund materials for controversial weapons, thermal coal, and tobacco companies. The ETF also has a low Portfolio Carbon Risk Score.
The fund is composed of 194 positions, with Canadian electricity player Hydro One weighted highest at 4.98%, followed by American construction aggregates producer Vulcan Materials at 2.36%.