For this week’s episode of ETF 360, ETF Trends CEO Tom Lydon and CIO Dave Nadig spoke with Arne Noack, DWS Head of Systemic Investment Solutions for the Americas, to chat about the DWS strategy for ESG and how to incorporate into your portfolio with SNPE.
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ESG assets were big in 2020, and it hasn’t slowed down this year, as Noack explains how there’s excitement to see the trend really taking off. Environment, social, and governance-related investing is starting to take over mainstream investors’ consciousness.
This is fortunate, as it’s not only reasonable to think about the impact on these areas in our day-to-day lives, but also essential to consider these aspects when it comes to where investors are putting their money and how it will impact the things around them.
“It makes sense from a financial standpoint as well,” Noack adds. “I’m very delighted to be part of that trend.”
As far as whether to look at ESG as a sleeve or an approach to the whole portfolio, Noack explains how these incorporation concerns could have a cost on performance. This is not something Noack wants to see, and DWS products have shown that it really doesn’t need to be the case.
“You can think about it from both angles,” Noack explains. “You can look at ESG under a more thematic lens. You can also look at climate-related products and mix those in as certain sleeves or exposures to express either value or a certain conviction on that particular industry. Or you can make it a mainstream core aspect of your portfolio, where, instead of tracking the S&P 500, you track the S&P 500 ESG Index, which is super similar to the benchmark but has meaningful improvement when it comes to the environmental, social, and governance-related aspects.”
Keeping an Eye on SNPE
Shifting gears to the Xtrackers S&P 500 ESG ETF (SNPE), Noack explained that it’s designed to be the go-to product when it comes to U.S. large cap exposure, particularly for advisors interested in the largest and most popular index in the world, the S&P 500.
To be clear, the starting point is the S&P 500. The ESG component being utilized in the ESG version of the benchmark sees it in such a way that is industry group neutral. Instead of a specific sector focus, the fund really focuses and invests into only the top 75% names, all from an ESG perspective.
Noack summarizes, “with SNPE, you get a product that is very close to the S&P 500 in terms of its look and feel from an exposure standpoint and a performance standpoint, but it has those meaningful improvements related to ESG aspects.”
He also emphasized how the European market is actually far ahead of the United States in terms of ESG. Regulators in Europe have been pushing regulation and legislation for years to make sure that ESG considerations are not only tangential aspects in the practices of financial advisors, but that those same advisors are starting to be required to put ESG front and center in their client conversations.
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