The LDEM ETF tracks the performance of an index that starts with emerging market large- and mid-cap stocks and includes companies with relatively strong environmental, social and governance ratings. It applies exclusion criteria for certain controversies and restricted business activities, so its holdings can differ from those of a standard emerging market index.

It suits investors who want diversified exposure to emerging market stocks, also want ESG screening, and are considering a long-term, index-tracking holding.

It is a passively managed (index-tracking) ETF run by iShares.

The fund tracks, through a representative sampling approach, an index built from emerging market stocks that reflects within-sector ESG ratings and controversy-related criteria. Rather than shifting holdings defensively in response to market conditions, the manager focuses on maintaining investment characteristics similar to those of the index.

• ESG screening criteria applied
• Diversified exposure to emerging market stocks

Assets under management (AUM) stand at $31.4M, and the total expense ratio is 0.16% per year.

As a micro-cap ETF, its trading convenience and bid-ask conditions should be checked before placing an order. It is also wise to compare the fee shown automatically with cost differences among similar products.

Emerging market stocks are affected by growth expectations, currency fluctuations, commodity and export conditions, and policy changes in individual countries. The return pattern of the LDEM ETF may also differ from that of broad emerging market stocks because of these market factors and the sector composition differences created by ESG screening.

Demand for emerging market exposure that reflects ESG criteria is tied to the interest of investors who want inclusion rules different from those of a standard emerging market index. However, because a micro-cap ETF may feel more or less liquid depending on market participation and trading conditions, investors should check bid-ask prices and trading volume at the time of both buying and selling.

Its strength is diversified emerging market exposure with ESG screening, but country, currency and liquidity variables are risk factors to manage alongside it.

The ESGD ETF shown in the table offers ESG equity exposure centered on developed markets, so its regional scope differs from that of the LDEM ETF. The ESGE ETF is a comparable fund covering the emerging market ESG category, while the VSGX ETF has a broader regional mix because it covers international stocks as a whole. The KLMN ETF focuses on North American climate themes and the KLMT ETF on global climate themes, so investors who want emerging market ESG-screened exposure should distinguish differences in index scope, management fees and asset size.

When considering an emerging market ESG ETF, investors should check how the index's selection criteria differ from those of a general market index and whether the trading environment fits their own trading style. Because the LDEM ETF is micro-cap in size, it is important to verify that it suits a long-term holding purpose and your order method.

Emerging market stocks can be sensitive to country-level policy, currencies, geopolitical variables, and economic and commodity conditions. ESG screening can create a holding structure different from a general index, and trading conditions tied to micro-cap size should also be checked when actually placing orders.

The iShares ESG MSCI EM Leaders ETF is a passive product worth considering for investors who want both emerging market diversification and ESG screening. Because its inclusion criteria differ from those of general emerging market products, it is appropriate to compare fees, trading conditions and distribution policy, and then judge whether it fits your own investment objectives.