In just over two months of trading, the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE Arca: USSG) became a $1 billion exchange traded fund. To be precise, USSG had $1.18 billion in assets under management as of Wednesday, May 29.
USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The expense ratio for USSG is 0.10%, which is well below the average cost of 0.39% for ESG funds, making it ideal for investors who are also seeking a low-cost solution to add ESG to their portfolios. The Finnish pension insurance firm was an early investor in USSG and a significant one at that, seeding the ETF with more than $800 million.
Although the idea of socially responsible ETFs that focus on environmental, social and governance (ESG) is not relatively new, it’s still struggling to break into the investment mainstream, particularly within the U.S. Socially-responsible investing may be turning a corner.
USSG tracks the MSCI USA ESG Leaders Index and holds 339 stocks.
Understanding USSG ETF
USSG seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI USA ESG Leaders Index. In order for companies to be included in the fund, the methodology includes a comprehensive screener that filters out alcohol, weapons, gambling, and other controversial products or activities.
Next, an ESG rating is applied that assesses risk and opportunities in order to select companies that will eventually be part of a ranking process. From here, only the top companies with the best ESG ratings are selected by sector.
USSG allocates over 30% of its weight to technology stocks while the healthcare and consumer discretionary sectors combine for over a quarter of the fund’s weight.
Furthermore, while ESG ETFs are still vying for market share in the ETF space, it appears to be progressing with the advent of new products meeting demand. In fact, sustainability is one DWS’s four core values, not only from an investment perspective, but also as a financial market participant.
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