Getting exposure to companies outperforming environmental, social, and governance (ESG) benchmarks doesn’t have to come at an exorbitant price. At a 0.16% expense ratio, the Xtrackers MSCI ACWI ex USA ESG Leaders Equity ETF (ACSG) does just that.
ACSG tracks an MSCI index of global stocks outside the U.S., selecting those securities that score the highest relative to their peers on environmental, social, and governance factors. ACSG includes companies that score in the top 50% of scores in each sector — and so will own about half as many companies as the parent index — then weights those stocks to keep the sector allocation in line with the parent index.
The fund excludes companies involved in alcohol, tobacco, gambling, controversial and conventional weapons, nuclear power, and civilian firearms.
ACSG is up 17% within the past year as ESG, continues to gain in popularity among investors. In the past six months, the fund is up about 22%.
The momentum in ACSG has been strong the past year after the fund returned to its pre-pandemic levels. Since the 50-day moving average moved past its 200-day moving average, the so-called ‘golden cross’, the fund has been on a steady uptrend.
Big Tech Is Leading the Way for ESG
A closer look at the fund’s top holdings reveals that investors snag diversified exposure to Asia via big tech companies like Taiwan Semiconductor Manufacturing, Tencent Holdings, and Alibaba Group. Together, these names comprise about 10% of the fund with strong performance, especially from Taiwan Semiconductor, which is up almost 160% the past year.
While Asia is slightly behind Europe and North America in ESG popularity, it’s quickly catching on.This can only help add more diversification to ACSG, giving investors more international exposure with an ESG tilt.
As a Bloomberg article notes, “solid returns, along with the need to build a more resilient portfolio, are attracting investors to the sector in Asia, said Amy Lo, co-head of Asia-Pacific wealth at UBS Group AG in Hong Kong. The Swiss bank’s surveys have shown that three-quarters of family offices are making some sustainable investments already.”
“ESG has become increasingly compelling for investors,” Lo said at the Asian Financial Forum Monday. “This is a real game changer.”
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