The Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE Arca: USSG) debuted in early March and already has $1.47 billion in assets under management, making it not only one this year’s most successful new ETFs, but one of the largest ESG ETFs, regardless of age.
USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The expense ratio for USSG is 0.10%, which is well below the average cost of 0.39% for ESG funds, making it ideal for investors who are also seeking a low-cost solution to add ESG to their portfolios.
Yes, that relationship helped USSG come to market with well over $800 million in assets, but the fund has proved adept at organic over the past seven months. While USSG is not old, its underlying index has a longer track record to analyze.
“The MSCI USA ESG Leaders Index, however, has existed for well more than a decade. Since June 1, 2004, the index has experienced only three years with negative returns,” according to Kiplinger. “It has averaged 8.5% in annual returns through Sept. 30, which is only slightly less than the 8.9% of the MSCI USA Index, which consists of more than 600 large- and mid-cap U.S. stocks. Depending on the year, the ESG index actually outperformed – a reminder that you’re not necessarily sacrificing much, if any, in the way of returns by investing responsibly.”
Understanding USSG’s Rise
While ESG ETFs are still vying for market share in the ETF space, it appears to be progressing with the advent of new products meeting demand. In fact, sustainability is one of DWS’s four core values, not only from an investment perspective but also as a financial market participant.
USSG holds 325 stocks, nearly 29% of which hail from the technology sector. The consumer discretionary and healthcare sectors combine for 27% of the fund’s roster.
Data for environmental, social and governance (ESG) has been an ongoing challenge in the space, but signs are apparent that the area is improving. This could certainly help ease investor fears at a tenuous time where trade wars and inverted yield curves are on their minds.
Adding to USSG’s allure is its annual fee of just 0.10%, which makes one of the least expensive ESG ETFs on the market today.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.