Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
ESG Funds: Environmental, Social, and Governance
05/13/2016 9:00 am EST
Significant developments have taken place over the past two years in Environmental, Social, and Governance (ESG) index-based investing, explains S&P Capital IQ analyst Todd Rosenbluth in The Outlook.
S&P Global Market Intelligence thinks the growing popularity with investors is the result of more modest global economic expectations, a focus on climate change and the gender pay-gap disparity, as well as a new generation of investors comfortable with alternatively-weighted passive strategies.
There have been more than 30 new ESG indices launched during the last 15 months that cover climate change issues, fossil fuels, and broader ESG metrics.
One such S&P Dow Jones index-based product is SPDR S&P 500 Fossil Fuel Free ETF (SPYX), which launched in December 2015 and had $72 million in assets.
The ETF has a 0.25% net expense ratio and excludes companies that own any fossil fuel reserves.
Among US mutual funds, Calvert Investments has been a large proponent of ESG investing and has benefited from the demand for such strategies.
Calvert’s goal is to find opportunities in industries and companies that exhibit both strong fundamentals and positive ESG characteristics.
Those include corporate environmental performance and regulatory compliance, high degree of corporate responsibility and positive human rights records, shareholder accountability, and corporate philanthropy.
Calvert US Large Cap Core Responsible Index Fund (CSXAX), which had approximately $700 million in assets across various share classes, was one
of the Calvert equity products that has been performing relatively well.
Within Calvert’s governance criteria are board diversity and support of women and minority-owned businesses.
Last month, State Street launched an ETF that focused specifically on investments where women play a significant role within the company’s leadership.
SPDR SSGA Gender Diversity Index ETF (SHE) is an investment that fits those criteria as the ETF is constructed with companies that exhibit the best gender diversity within each sector.
The criteria include the ratio of female executives and female members of the companies’ board of directors to all executives and members of the board of directors.
The ETF has $272 million in assets, despite first trading in March 2016. The ETF has a 0.20% expense ratio.
By Todd Rosenbluth in The Outlook
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