State Street Global Advisors is expecting to launch a new low-cost environmental, social and governance (ESG) ETF on the ASX on August 5, with a similar risk-return to the ASX 200.
The SPDR S&P/ASX 200 ESG Fund will go by the ticker E200 and is the first ETF to track the ASX 200 ESG Index, a broad-based, market-cap-weighted index designed to measure the performance of securities meeting sustainability criteria, while maintaining similar overall industry group weights as the ASX 200 Index.
The securities are market cap weighted so they represent 75% of the market capitalisation of each industry group in the index, allowing it to be a sustainable alternative with a similar risk-return profile the broader index.
Head of SPDR ETF Asia Pacific Distribution Meaghan Victor said: "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."
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E200 incorporates exclusionary screening criteria which remove companies involved in tobacco and controversial weapons, as well as companies with low ESG scores and incorporates best in class ESG screening to include companies that are in the top 75% of their industry group.
"Australian investors are drawn to ETFs for their transparency and ability to offer diversification through a basket of securities in one single trade. They have proven to be a highly popular way to access core asset allocations for Australians - totaling more than $65.6 billion as at 30 June 2020," she said.
"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 management costs are 0.13% annually which is the same as its non-ESG fund and makes it one of the lowest cost ESG ETFs on the Australian market. The fund will provide quarterly distributions and rebalance the index annually.
Modifications to the index will take place in September 2020, providing an exclusion of companies generating more than 5% revenue from thermal coal.
"ESG investing can have an impact on a company's long-term performance, allows clients to invest based on their values, and has a demonstrated link to sustainable long-term value creation.
"And now, it doesn't need to come at a premium. E200 will spark a new wave of investing for institutions, intermediaries, platforms, financial advisers and retail investors alike," Victor said.