‍Note: If you’re wondering WTF an ETF is, click here. 

The good news - The most popular global shares ethical ETFs on the ASX don’t invest in companies that make fighter jets, nuclear missiles, guns and other military-grade weapons

The bad news - No global shares ethical ETF is perfect. They invest across the global economy and inevitably some of these companies have ties to militaries and weapons. However, there are clear differences between the 3 most popular ones available on the ASX. ‍

• Betashares ETHI has strict ethical screens and exposure to companies with ties to militaries and weapons ‍
• Blackrock’s IWLD has weak ethical screens and high exposure to companies with ties to militaries and weapons ‍
• VanEck’s ESGI has moderate ethical screens and exposure to companies with ties to militaries and weapons 

While you may not be able to find a fund that perfectly aligns with your ethics , you should be able to find one that lets you sleep at night knowing your investments match your values.

Most ETFs are invested in companies making weapons, or providing services to militaries. They invest broadly across the economy and don’t use ethical screens. 

But some ethical ETFs also invest in these companies. The weapons industry is involved in many economic sectors (especially tech, communications, and manufacturing), and looking closely at the ethical screening rules of some of the ASX’s biggest ethical ETFs reveals many are more invested in the military-industrial complex than assumed.  

Investments in weapons and military services is much more relevant for ethical International shares ETFs than ethical Australian shares ETFs, as most weapons companies are based in the US, EU and Japan. 

The ASX offers several popular ethical ETFs that invest in international companies.  each with different levels of exposure to the military and weapons. 

To help you choose the one that best fits your values, SIX looked at the 3 most popular ethical ETFs on the ASX and assessed: 

• What ethical screens they use on weapons and the military, and 
• What they actually invest in

Let's look at an ETF through an analogy of an onion. By peeling back the layers, we can see exactly how "deep" each fund’s screens and investments go.

Layer 1: The outer skin - Weapons

This includes companies like Boeing or Lockheed Martin that manufacture missiles and nuclear warheads.

A standard US fund like IVV (S&P 500) sits right here, with large direct exposure to weapons and military contractors.

The good news is ethical ETFs ETHI, ESGI, and IWLD all successfully peel this core layer away, generally excluding direct manufacturers of civilian, controversial and nuclear weapons. 

Layer 2: The Inner Skin - Dual-Use Components

As we peel deeper, we find companies making "ingredients" for the military like GPS systems, specialized glass, paint and sensors. 

Semiconductor manufacturer Infineon and car companies like Ford, Renault fall into this category.  

Layer 3: The Core - Services

This is the least visible layer. It involves everyday tech but modified specifically for the military or weapons — think cloud computing, 5G, and AI— that is used by militaries for surveillance, data warehousing, or logistics. 

Companies like Palantir, Google and Microsoft fall into this category. 

• ‍VanEck’s ESGI has the most invested in companies with ties to military components (9%), such as companies making jet engines, military-grade lubricants, or specialized sensors.‍
• Blackrock’s IWLD has the least invested in companies with ties to military components, but also the most invested in companies with ties to military services ‍
• Betashares’ ETHI has the strictest screens for physical weapons but is heavily invested in tech. Around 22% of the companies in the fund by market value have military ties, but it’s mostly digital. NVIDIA and Broadcom alone make up 11% of the fund; they don’t make guns, but their chips are essential for modern military AI and their revenue from military contracts is probably 5-10% of their total revenue. 

There is no wrong choice here; these ethical ETFs are all significantly less invested in the military-industrial complex than any ETF with no ethical screens. 

• If you want the strictest filters on the most visible and direct weapons, Betashares’ ETHI may be suitable. 
• If you don't mind more "dual-use" components or services, Blackrock’s IWLD or VanEck’s ESGI may be right for you. 

While you may not be able to find a perfect fund, you should be able to find one that lets you sleep at night knowing your investments match your values.

It’s important to distinguish between market cap (here we mean the market value of a company that has any ties to weapons/militaries) and revenue (how much money the company earns from weapons and military services).

When we say in this blog that "31% of a fund has military ties," it doesn’t mean 31% of your money is investing in missiles. It means that companies that earn any revenue from manufacturing or services to weapons/militaries account for 31% of the ETF’s market capitalisation. 

Imagine a furniture maker. It sells 1,000 chairs a day. If one of those chairs is sold to a military base, is it an essential military contractor? Probably not. 

What if half the seats it makes are specifically made for fighting jets and to withstand extreme conditions, then we say this is an essential military contractor.

Interested in going deeper? Send us an email and we'll provide you with some extra research