A Pair of ETFs to Consider for ESG and China Exposure | ETF Trends

2021 is seeing early strength appear in various themes, including environmental, social, and governance (ESG) investing and in China. That said, a pair of funds to consider are the Xtrackers MSCI All China Equity ETF (CN) and the Xtrackers S&P 500 ESG ETF (SNPE).

CN seeks investment results that correspond to the performance of the MSCI China All Shares Index. The fund will normally invest at least 80% of its total assets in securities of issuers that comprise either directly or indirectly the underlying index or securities with economic characteristics similar to those included in the underlying index.

The underlying index is designed to capture large- and mid-capitalization representation across all China securities listed in Hong Kong, Shanghai, and Shenzhen. CN’s net expense ratio comes in at at 0.50%, while the fund is up over 30% within the past year.

CN Chart

SNPE seeks investment results that correspond generally to the performance of the S&P 500 ESG Index. The index is a broad-based, market capitalization weighted index that provides exposure to companies with high ESG performance relative to their sector peers while maintaining similar overall industry group weights as the S&P 500 Index.

The fund uses a full replication indexing strategy to seek to track the underlying index. With a net expense ratio of just 0.10%, SNPE is up about 15%.

SNPE Chart

China Pushing for More ESG

Another commonality with ESG and China is that the second largest economy is looking to push the pace when it comes to ESG initiatives in Asia. Per a Bloomberg article, “China is set to post the fastest growth in Asia for environmental, social and governance investments after the country boosted exchange-traded fund assets 18-fold in the past two years, according to estimates from Bloomberg Intelligence.”

This news also bodes well for ETFs focused on ESG like SNPE.

“China’s push for renewable energy and electric vehicles will spark more fund flows into ESG-related ETFs, contributing to a 20% growth in assets across Asia this year, according to BI analyst Esther Tsang,” the article added.

“We are seeing a surge there,” Tsang said. “China is going to dominate.”

However, there’s still a lot of ground to cover when it comes to leading the ESG pack in Asia.

“Even with the asset growth in the past two years, China only accounts for a little over 10% of Asian ESG ETF assets under management,” the article said further. “Japan leads the pack, accounting for about 80% of the $40 billion in ESG funds that trade on exchanges.”