The iShares ESG MSCI USA Leaders ETF (SUSL), a socially responsible ETF, has become a member of the $1 billion AUM club in short order. It joined the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG), also a socially responsible ETF, which hit the billion dollar mark just one day before.
Besides reaching $1 billion in inflows, USSG and SUSL are similar on a number of fronts.
- They screen out similar companies that are considered not to be socially responsible.
- They track stocks selected from the MSCI USA Index.
- They avoid exposure to companies with low environmental, social, and governance (ESG) ratings.
“I think there is institutional demand for ESG investing so SUSL saw nearly a billion dollars of inflows this month,” Todd Rosenbluth, CFRA Head of ETF & Mutual Fund Research, told Yahoo Finance. “It follows what we saw with Xtrackers (USSG) that also had over $800 million in inflows. The fact that these two products have priced at 15 or 10 basis points … is going to help get more investors in the door.”
Investors that have already entered that door are doing so for two main reasons, according to Forbes. First, companies that take into account ESG factors tend to perform well. And second, ESG funds allow investors to do something good and feel good about it at the same time.
“Going forward, ESG could become a self fulfilling prophecy as more money flows into highly ranked stocks and out of low ranked stocks,” Matthew Tuttle, who is the CEO/CIO of Tuttle Tactical Management, told Forbes. “That is a large reason for the out-performance.”
As far as socially responsible ETFs going mainstream any time soon, Rosenbluth has his reservations.
“Right now it’s still a very small piece of the growing pie,” he said. “I do think we will see this become more mainstream longer term, but investors are still buying well-diversified, very cheap products and not really focusing as much on the ESG criteria.”
SUSL has an expense ratio of 0.15%. Its biggest holdings include Microsoft (MSFT), Meta Financial Group Inc. (CASH), Johnson & Johnson (JNJ), Alphabet Inc Class C (GOOG), and Alphabet Inc Class A (GOOGL), which equal 20.58% of its total holdings.
Watch the CNBC segment that discusses SUSL here:
For more information, visit etftrends.com/quote/SUSL.