The ESG race is heating up as State Street unveils a new low-cost ESG ETF providing similar risk/return profile to the S&P/ASX 200 index.
The SPDR S&P/ASX ESG Fund (E200) is the first ETF to track the S&P/ASX ESG index, which is designed to measure the performance of securities meeting sustainability criteria while maintaining similar overall industry group weights as the S&P/ASX 200. Management costs will be 0.13 per cent per year, making it one of the lowest cost ESG ETFs available to Australian investors.
“Today, [high-profile] issues such as climate change, diversity, executive remuneration and corporate culture mean more investors are looking to align their investment strategies with their values,” said Meaghan Victor, head of SPDR ETF Asia-Pacific distribution. “For the first time, investors will be able to access an ESG fund with a similar risk-return profile to the Australian equity market benchmark, the S&P/ASX 200 Index.”
E200 uses exclusionary screening and best-in-class rankings to improve ESG characteristics, screening out companies involved in tobacco and controversial weapons industries, as well as companies with low ESG scores. Top-ranking ESG companies relative to industry peers are also included.
ESG ETFs have spiked in popularity in the last two years and are expected to grow to more than $1.9 trillion in the next decade.
“Australian investors are drawn to ETFs for their transparency and ability to offer diversification through a basket of securities in one single trade,” Ms Victor said. “They have proven to be a highly popular way to access core asset allocations for Australians – totalling more than $65.6 billion as at 30 June 2020.
“But ETFs are more than inflows. Their low-cost and simple characteristics have also meant they have democratised investing, giving investors access and choice to equities that decades ago would have only been accessible to a select few. Now that choice includes ESG.”
The ETF will list on the ASX on Wednesday, 5 August 2020.