In 1994, there were just 26 funds adhering to environmental, social and governance investing principles with just $1.9 billion in assets under management. Today, just in the world of exchange traded funds, there are dozens of ESG products and the population feels like it's growing by the day.

As for $1.9 billion, that's merely good enough for the fourth spot among ESG in terms of assets, a spot occupied by the iShares ESG MSCI USA Leaders ETF (NASDAQ:SUSL), a fund that debuted last May. To be precise, SUSL has $1.95 billion in assets under management.

If 2019 is any indication, ESG funds are poised to continue growing in significant fashion.

“Sustainable funds in the United States attracted new assets at a record pace in 2019. Estimated net flows into open-end and exchange-traded sustainable funds that are available to U.S. investors totaled $20.6 billion for the year,” according to Morningstar. “That's nearly 4 times the previous annual record for net flows set in 2018.”

With that in mind, here are some ESG ETFs with hidden gem status to consider.

Xtrackers S&P 500 ESG ETF (SNPE)

The Xtrackers S&P 500 ESG ETF (NYSE:SNPE) does a little more love for multiple reasons. If market observers are going to lavish praise upon ESG investing and ETFs that accumulate more than $100 million in assets, which pundits do praise, than SNPE with $114.6 million in assets under management following a June 26, 2019 debut is worth of some praise.

To date, SNPE is the only ETF tracking the S&P 500 ESG Index, which excludes Facebook (NASDAQ:FB), among others. SNPE holds 313 stocks, indicating adding an ESG filter to the S&P 500 results in substantial subtractions.

Predictably, SNPE features a hefty overweight in tech (31.74%), but there are favorable traits including a 16.35% gain over the past six months and an expense ratio of 0.11%, one of the lowest in the category.

Nuveen ESG Small-Cap ETF (NUSC)

There are a few dedicated small-cap ESG ETFs on the market, but in what maybe a surprise to some the largest is the Nuveen ESG Small-Cap ETF (CBOE:NUSC). NUSC tracks the TIAA ESG USA Small-Cap Index.

“The Index uses a rules-based methodology that seeks to provide investment exposure that generally replicates that of small-cap benchmarks through a portfolio of securities that adhere to predetermined ESG, controversial business involvement and low-carbon screening criteria,” according to Nuveen.

What helps convert some investors to ESG is knowing that virtuous investing doesn't lead to slack returns and NUSC can help with that conversion. Over the past year, the Nuveen ETF is beating the the Russell 200 and S&P SmallCap 600 indexes by 200 basis points and 500 basis points, respectively.

iShares ESG MSCI EM Leaders ETF (LDEM)

The iShares ESG MSCI EM Leaders ETF (NASDAQ:LDEM) is new, but not obscure. Barely more than a week old, LDEM already has almost $650 million in asset thanks to a massive influx of cash from Finnish pension provider Ilmarinen, a firm whose largess backed two of 2019's most successful ESG ETF launches.

LDEM follows the MSCI EM Extended ESG Leaders 5% Issuer Capped Net Index. Time will tell if the new iShares will be a winner performance-wise, but research suggest that when applied to emerging markets, ESG screening can deliver better outcomes for investors.

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Thursday, February 13, 2020