Socially responsible exchange traded funds that track environmental, social, and governance principles are gaining traction among the investment community as a viable core portfolio alternative.
“We are definitely finally seeing that ESG tipping point. Institutions are coming in, and finally, we’ve got products… that really tackle this problem of ‘do you have to give up something to have ESG?’ and the answer is you don’t,” Luke Oliver, Head of Index Investing, Americas, DWS, said at the Inside ETFs conference.
DWS offers a suite of ESG-related ETF strategies. For example, the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE Arca: USSG) has been a popular play for investors seeking exposure to socially responsible investments. USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The underlying MSCI USA ESG Leaders Index provides exposure to large- and medium-cap U.S. companies with high environmental, social, and governance (ESG) performance relative to their sector peers.
Other options include the Xtrackers MSCI EAFE ESG Leaders Equity ETF (NYSEArca: EASG), Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (NYSEArca: EMSG) and Xtrackers MSCI ACWI ex USA ESG Leaders Equity ETF (NYSEArca: ACSG). The ETFs try to provide exposure to companies with high ESG-related performance relative to their sector peers. The underlying index is based on MSCI ESG Ratings, MSCI ESG Controversies, and MSCI Business Involvement Screen Research to determine index components.
Additionally, the Xtrackers S&P 500 ESG ETF (SNPE) is among the first ETFs to track the S&P 500 ESG Index, the environmental, social, and governance derivative of the widely followed S&P 500 Index. SNPE’s underlying index seeks to target 75% of the float market capitalization of each Global Industry Classification Standard Industry Group within the S&P 500 Index, using an ESG score as the defining characteristic.
Watch Luke Oliver Discuss ESG As A Core Portfolio Alternative:
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.