It’s only been just over a year and a half since the Xtrackers S&P 500 ESG ETF (SNPE) debuted on the New York Stock Exchange, but it’s riding a wave of popularity. The fund is up about 35%, 5% higher than the S&P 500’s 30%.
SNPE seeks investment results that correspond generally to the performance, before fees and expenses, of the S&P 500 ESG Index. The index is a broad-based, market capitalization weighted index that provides exposure to companies with high environmental, social and governance (“ESG”) performance relative to their sector peers, while maintaining similar overall industry group weights as the S&P 500 Index.
The fund uses a full replication indexing strategy to seek to track the underlying index. With a net expense ratio of just 0.10%, it gives the cost-conscious investor even more reason to act.
The fund gained a robust 20% in 2020. Its expense ratio comes in 27 basis points below its category average.
Some analysts are questioning whether ESG can maintain its momentum after its breakthrough year in 2020. Other analysts say the trend still has room to run in 2021, especially under newly installed Joe Biden presidency.
“With trillions of dollars pouring into ESG funds last year, 2020 has been called the ‘tipping point’ year for this mega-trend,” an OilPrice.com article said. “But many are predicting that the ESG boom will take off again on January 20th, 2021. That’s because after the most dramatic election we’ve seen in recent history, a ‘green president’ is set to take office with plans to shake things up on day 1.”
Leveraging Big Tech Strength
Much of SNPE’s performance can be attributed to its top holdings, which comprise the who’s who in big tech: Apple, Amazon, and Microsoft. Combined, the three make up just over 20% of the fund’s holdings.
Big tech has been on a serendipitous run in 2020, despite the Covid-19 pandemic. Combine that performance with ESG, and investors get exposure to two dynamic forces that are trending higher.
Per a Wall Street Journal article, President Biden is said to be demanding more from companies in order to uphold ESG standards.
“It’s not just investors demanding it; all other stakeholders—workers, customers, clients, the communities you operate in—they are expecting a higher standard from companies in the way that they operate,” said Jon Hale, head of sustainability research at Morningstar. “In virtually every industry, there’s a unique set of ESG issues that are material to that industry.”
For more news and information, visit the ESG Channel.