Investors who own these ASX exchange-traded funds (ETFs) sure got some big returns in 2024.

What do they have in common? They are all examples of impact investing, a strategy whereby investors focus on advancing particular social or ethical causes while still being able to generate financial returns. This investment style is undoubtedly on the rise.

The 2023 ASX Investor Study showed that 31% of investors were environmentally, socially, and governance (ESG) conscious. The report also found that 23% of investors bought or sold an investment based on environmental factors during that year. 

In 2024, ethical ASX ETFs showed investors that they can have their cake and eat it, too, enjoying strong gains through ethical funds. Let's take a closer look.

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Making financial decisions with the goal of contributing positively to the planet is a noble cause. It's also important to recognise how these ETFs are actually constructed. 

Different ethical ETFs use different strategies. Some ETFs actively include specific types of holdings to build their portfolio, such as targeting climate leaders in a certain industry.

Other ETFs use a strategy of actively excluding specific companies based on established criteria. 

For example, an ETF may exclude companies that negatively impact the environment. Or it might exclude companies linked to fossil fuels, nuclear power, tobacco or weapons. 

I'm not here to rain on anyone's parade, but I do think it's important for investors to decide for themselves how they interpret 'ethical' and 'sustainable' when it comes to their personal investment choices. 

With that in mind, these ethically conscious ETFs had strong gains in 2024. 

Vanguard Ethically Conscious International Shares Index ETF (ASX: VESG)

One-year return: 28.9%

This ASX ETF excludes companies that have a specified level of business involvement in fossil fuels, nuclear power, alcohol, tobacco, cannabis, gambling, adult entertainment or weapons.

Due to its screening process, it has a large exposure to the US technology sector. Its largest holdings are Apple, Nvidia Corp, Microsoft and Amazon. 

These holdings are likely to have influenced its strong performance in 2024, given this year's monster rally in tech and artificial intelligence shares.

This ETF might particularly interest investors looking to invest in some of the largest, ethically conscious companies based outside Australia. 

Betashares Global Sustainability Leaders ETF (ASX: ETHI)

One year return: 23.4%

The ETHI ETF aims to track the performance of an index that includes a portfolio of large global stocks identified as climate leaders. Similar to other ethical ETFs, ETHI excludes companies with direct or significant exposure to fossil fuels, gambling, tobacco, animal cruelty and weapons. 

This ASX ETF then goes a step further by excluding companies with human rights concerns or gender inequality. For example, the fund excludes McDonald's because the "majority of revenue comes from the sale of junk food" and Tesla as it's "implicated in workplace relations-related controversies".

The fund consists of the 200 largest companies that fit this criteria. Its strong performance in 2024 was influenced by strong growth from significant holdings such as Apple, NVIDIA, Visa, and Mastercard.

Vanguard Ethically Conscious Australian Shares ETF (ASX: VETH)

One year return: 12.01%

The VETH ETF excludes the securities of companies that have a specified level of business involvement in fossil fuels, nuclear power, alcohol, tobacco, cannabis, gambling, adult entertainment or weapons. 

It has a large exposure to the Australian financial sector, with the Big Four ASX banks comprising more than 25% of holdings. This has largely influenced its strong returns this year.

VETH might not consist solely of companies dedicated to sustainability or climate action, but it may interest investors looking for significant exposure to ASX bank shares while avoiding specific mining or gambling companies that may be included in other ASX 200 or 300 tracking ETFs.