Clients looking for more ESG? ESG investing has faced some hard times over the last year or so, but that doesn’t mean clients have given up on it. That may require some new approaches to the space, like using a multiasset ESG ETF. Advisors have options, but should keep an eye on the iMGP RBA Responsible Global Allocation ETF (IRBA). IRBA uses a go-anywhere approach, but actually invests in other ETFs to craft its exposures.
See more: “Why Consider a Fund of Funds ETF Like IRBA?”
The multi-asset ESG ETF weights the iShares ESG Aware Aggregate Bond ETF (EAGG) as its largest holding at 30.8%. As a fixed income strategy, EAGG tracks a market-value-weighted index of U.S. dollar-denominated bonds from ESG-favored issuers. The ETF considers factors like tobacco, controversial weapons, or civilian firearms. EAGG has seen good YTD performance as well, returning 2.16% YTD and adding $52.6 million in flows in just the last month.
IRBA’s second largest weighted strategy looks abroad. The iShares MSCI Global Sustainable Development Goals ETF (SDG) tracks an index of firms focused on the sustainable development goals. SDG’s index of ESG names screens for those firms that derive at least half of revenues from meeting those goals. That includes health, energy, and education work, though SDG eliminates firms if they derive 10% or more of sales from alcohol, tobacco, or predatory lending.
IRBA weights SDG at 18.1%. SDG has returned 0.6% over the last three months, sitting at $410 million in AUM.
Finally, IRBA’s third-largest-weighted ETF holding eyes large cap value investments. The Nuveen ESG Large-Cap Value ETF (NULV) sits at a 16.9% weight in IRBA. NULV tracks its U.S. large-cap value stock index with a multi-factor optimizer and an ESG screen. The strategy targets the most socially responsible firms, considering value factors like price to book, forward price/earnings, and dividends.
Why does IRBA invest in other ETFs to craft its allocations? By investing in other ETFs, the firm embraces its top-down, fundamentals-driven profit cycle approach. IRBA also allows investors to get the ESG expertise of multiple firms in one strategy, too. IRBA has returned 2.6% YTD, charging 69 basis points.
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