Comparing Global ETFs: Vanguard's VXUS vs. State Street's Climate-Focused NZAC

The Vanguard Total International Stock ETF (NASDAQ:VXUS) provides broad, low-cost exposure to non-U.S. markets, while the State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) offers a global portfolio filtered for climate-risk mitigation.

Investors often look at international funds to reduce domestic concentration, but these two funds approach global diversification differently. While VXUS avoids U.S. stocks to complement a domestic portfolio, NZAC spans developed and emerging markets worldwide, including the U.S., while targeting companies aligned with net-zero climate goals.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Vanguard fund is more affordable, with an expense ratio of 0.05% compared to 0.12% for the State Street fund. Vanguard also offers a higher payout, with a 2.5% yield versus 2% for its climate-focused peer.

Performance & risk comparison

What's inside

The State Street SPDR MSCI ACWI Climate Paris Aligned ETF selects companies aligned with the Paris Climate Agreement goals, leading to concentrations in technology at 35% and financial services at 17%. Its largest positions include Nvidia (NASDAQ:NVDA) at 6.07%, Apple (NASDAQ:AAPL) at 4.90%, and Microsoft (NASDAQ:MSFT) at 3.71%. The fund launched in 2014 and holds 628 securities, employing an ESG screen to satisfy climate benchmarks. The State Street SPDR MSCI ACWI Climate Paris Aligned ETF has paid $0.94 per share over the trailing 12 months, which on its recent ~$46.87 share price works out to a 2% yield.

The Vanguard Total International Stock ETF tracks the FTSE Global All Cap ex US Index with 8,602 holdings. This passive strategy weights financial services at 23%, technology at 19%, and industrials at 15%. Its largest positions include Taiwan Semiconductor Manufacturing (TWSE:2330) at 4.02%, Samsung Electronics (KOSE:A005930) at 1.80%, and ASML Holding (ENXTAM:ASML) at 1.42%. The fund launched in 2011 and does not use ESG filters. The Vanguard Total International Stock ETF has paid $2.19 per share over the trailing 12 months, which on its recent ~$87.03 share price works out to a 2.5% yield.

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Which looks like the better buy

The Vanguard Total International Stock ETF (VXUS) and State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NZAC) offer very different approaches to investing in global stocks. Choosing which is the better fund depends on your investment goals.

VXUS is for investors looking to go beyond U.S. stocks to gain international exposure. It's a comprehensive fund, as its holdings span across both developed and emerging markets. With over 8,000 equities, VXUS is a highly diversified ETF, and its far larger AUM offers superior liquidity. Its combination of a low expense ratio and a more attractive dividend yield make it an affordable fund to keep for the long haul.

NZAC is the better choice for those who view climate change as a risk, and who want to prioritize investing in organizations that seek to address climate change by implementing net-zero emissions strategies and other actions in support of the Paris Agreement. Since about 65% of this ETF comprises U.S. companies, NZAC is less about obtaining non-U.S. exposure and more about supporting these businesses. Investors are not losing out by choosing NZAC since it and VXUS have seen share price gains over time, with both delivering comparable returns over the last five years.

Robert Izquierdo has positions in ASML, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.