Key Morningstar Metrics for iShares ESG Aware MSCI USA Index ETF XSUS
- : SilverMorningstar Medalist Rating
- : HighProcess Pillar
- : Above AveragePeople Pillar
- : Above AverageParent Pillar
IShares ESG Aware MSCI USA ETF integrates environmental, social, and governance considerations without sacrificing the benefits of a broadly diversified, low-turnover portfolio.
This fund tracks the MSCI USA Extended ESG Focus Index, which captures large- and mid-cap stocks with acceptable environmental, social, and governance practices. The index filters out companies with controversial product lines or those currently involved in severe controversies. An optimizer determines the weightings of the remaining stocks, systematically tilting toward firms with better ESG characteristics while aiming for a 0.5% tracking error versus its parent index, the MSCI USA Small-Cap index. The fund’s actual tracking error hovered around 0.6% annualized from its 2016 inception through January 2026—not far from its target.
The fund tethers stock weightings to those of the parent index. This keeps performance in line with its tracking error target. Sector weightings must remain within 5 percentage points of those in the MSCI USA Index, and individual positions can’t deviate by more than 2 percentage points. The resulting portfolio has a similar makeup to the Morningstar Category average and category index. Its active share against the category index tends to hover between 20% and 25%, which means its portfolio looks very similar to the category index. Most of the fund’s largest and most consequential holdings overlap with those of the category index.
These constraints keep the fund’s performance and composition close to those of the broad market. However, this can limit its appeal for investors with stricter ESG preferences since the fund can include companies that might not have best-in-class ESG practices.
The fund charges a 0.15% expense ratio, which is competitive in its category. This should preserve the performance advantage earned by the fund’s diversified portfolio over its average category peer since its 2016 inception.
iShares ESG Aware MSCI USA Index ETF: Performance Highlights
The fund outperformed the category average by 2 percentage points annualized from its 2016 inception through January 2026, with similar volatility. Much of this can be attributed to its low fee and broad portfolio that captured winners as they rose. Similar to the category index, the fund overweighted technology stocks and rode the wave of the technology-led bull market that characterized most of its existence. It also leaned toward market leaders that drove much of the market’s recent success.
These bets helped the fund outpace its average peer by 3.8 percentage points during the artificial intelligence-driven market rally between May and October 2025. Nonetheless, the same positions detracted from fund returns during volatility in early 2025. The fund lost 19.2% between late February and early April 2025, compared with only 18% for the category average.
The fund’s ESG-driven deviations have not persistently translated into a long-term performance edge. It slightly lagged its parent index, the MSCI USA Index, since its 2016 inception with mixed stints of marginal over- and underperformance. Most of the performance deviations came from security selection, including tilting away from some recent winners like Alphabet.
