Invesco, the pioneering firm behind smart beta within the ETF space, announced in a press release the launch of a new smart beta fund that utilizes equal weighting investing with a tilt to ESG. The Invesco ESG S&P 500 Equal Weight ETF (RSPE) was created in collaboration with the S&P Dow Jones Indices to provide a new core holding option for investors seeking ESG investment.
RSPE is built upon the foundation of the popular Invesco S&P 500 Equal Weight ETF (RSP), a smart beta fund that launched in 2003 and has outperformed its benchmark that relies on market cap-weighting by 88% cumulatively since its creation. The equal weight approach is one that hedges against risk and volatility naturally and is increasingly preferred by investors; the fund is one of the biggest ETFs that utilizes smart beta globally and has over $30 billion in AUM.
“Invesco pioneered smart beta ETF investing nearly 20 years ago and we have been a leader in ESG ETFs for over a decade. RSPE brings these two concepts together, creating the simplest way to invest in a balanced portfolio of the ESG leaders of the S&P 500 Index,” said John Hoffman, Americas head of Invesco ETFs and indexed strategies, in the press release.
RSPE will utilize a smart beta, equal-weight approach while building on top of that with further screens for ESG metrics and considerations. The fund tracks the S&P 500 Equal Weight ESG Leaders Select Index, which pulls from the parent index that RSP utilizes, the S&P 500 Equal Weight Index. Securities within the parent index are screened with an ESG-filter methodology combined with S&P DJI ESG Scores to find the ESG leaders within industries.
Securities contained within the index are measured for ESG metrics specific to their industries, and the long-term implications for ESG risks are also evaluated on an individual industry basis to find companies that will both adhere to ESG principles and perform well in the long term. The S&P DJI ESG scores are based on the S&P Global Corporate Sustainability Assessment, an annual survey that companies complete that evaluates how they are performing and responding to changing ESG priorities and opportunities. The survey includes up to 1,000 data points for each company, which are then used to build the ESG score for the company; the index is comprised of the top 40% of performers per industry.
Companies are excluded if they are part of the GICS Oil and Gas Storage and Transportation Sub-Industry Code, or procure revenue from or own 10% of more of a company that operates within the following: arctic oil and gas exploration; alcoholic beverages; assault weapons; cannabis production or distribution; controversial weapons; genetically modified plants and seeds; gambling; military contracting; nuclear power; oil and gas exploration, production, generation, refinement, transportation, or storage; oil sands extraction; palm oil production and distribution; pesticides; riot control weapons; shale energy extraction; small arms; thermal coal; or tobacco. Companies are also excluded if they perform poorly according to the principles of the United Nations Global Compact.
RSPE will carry an expense ratio of 0.20%, the same as RSP.
“S&P Dow Jones Indices has been a pioneer in ESG, providing benchmarks for investors seeking to align their investment goals with their individual values for over 20 years,” said Margaret Dorn, senior director, head of ESG indices, North America, S&P Dow Jones Indices, in the press release. “The launch of the S&P 500 Equal Weight ESG Leaders Select Index reflects the continued evolution of ESG investing by combining a smart beta factor into an ESG benchmark. We are excited to license this Index to Invesco to expand the opportunities of equal weight into the ESG environment.”
For more news, information, and strategy, visit our Portfolio Strategies Channel.