Rockefeller Foundation Move Signals Sign of the Times for ESG

The name “Rockefeller” is one that is synonymous with oil, and the Rockefeller Brothers Foundation’s move to fight climate change is a prime signal that shows the sign of the times–going green could supplant the profits of black gold from a societal perspective.

With a history of building generational wealth through oil, the foundation is also pushing hard to fight climate change.

“Given how important oil was to building the family’s long-term success and fame, one might assume that Rockefeller foundations do not shy away from investments in the energy sector,” wrote Eric Dutram, a member of the Thought Leadership Team at DWS.This is why it is so astounding that one of his enduring foundations—the Rockefeller Brothers Foundation—is such a large proponent of fighting climate change and has already divested the vast majority of its fossil fuels from its portfolio.”

Meanwhile, in the oil market, first-quarter earnings have been a slippery slope for big oil companies thus far as geopolitical challenges and receding prices may be putting the clamps on profitability for the rest of 2019.

Venezuela sanctions as well as production cuts in Canada have affected the profit margins for companies, such as industry giants Exxon and Chevron. Exxon said earnings showed a loss of $256 million in the first quarter and net income dropped to $2.35 billion, which represents its lowest in the last three years.

“It was a tough market environment for us this quarter,” said Exxon Senior Vice President Jack Williams, who oversees the company’s refining and chemicals businesses. “The margins were at historically low levels.”

The ESG Movement

This latest move by the foundation shows a move towards environmental, social and governance (ESG) exchange-traded funds (ETFs). Although the idea of socially responsible ETFs 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, however, as demand for ESG fixed income products exceeded supply in Europe, according to new research by Cerulli Associates. The report revealed that inflows into ESG fixed-income products surpassed $11.4 billion the last two years, but a shortage of benchmark indexes that measure ESG-focused criteria makes it difficult for its inclusion in the asset class. However, an influx of new ESG products into the market over the next few years like USSG could help appease increased demand in the U.S.

Earlier this year, DWS Group announced the launch of the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE Arca: USSG), which 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.

“With USSG, we now bring the ability for investors to access domestic equity,” Fiona Bassett, Global Co-Head of Passive Asset Management and Global Co-Head of Product, DWS Group, told ETF Trends. “Critically, it will be the most cost-effective ESG ETF in the marketplace.”

“We would like for our clients to do well and do good, but not pay a premium for that,” added Bassett.

USSG provides exposure to large- and medium-cap U.S. companies with high environmental, social and governance (ESG) performance relative to their sector peers.

“We’re focused on bringing better solutions to the marketplace that provide innovation, value and access to our clients,” said Bassett. “ESG is a strategic focus for us. As a European provider we have a long heritage in this space that goes back over 20 years.”

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