Stockholm (NordSIP) – State Street Global Advisors (SSGA) launched a new ETF that screens the S&P 500 for ESG exclusions, as an alternative way of accessing the widely-tracked US market. This announcement follows SSGA’s launch of a new index designed to offer ESG-screened access to the SPDR STOXX Europe 600 in October.
The SPDR S&P 500 ESG Screened Ucits ETF will track the newly-launched S&P 500 ESG Exclusions II Index. The fund has a total expense ratio of 0.10% per year. The index methodology has been devised to exclude companies based on data by Sustainalytics.
The index is reviewed quarterly and components are free-float market-cap weighted. The exclusions eliminate exposure to controversial weapons, civilian firearms, tobacco and thermal coal, as well as noncompliance the UN Global Compact (UNGC). The resulting index portfolio excludes 36 stocks from the S&P 500, including such names as Berkshire Hathaway (Thermal coal), Johnson & Johnson (UNGC), Wells Fargo (UNGC), Boeing (Controversial Weapons) and Philip Morris International (Tobacco).
“There is strong demand for an ETF linked to this index with ESG overlay,” Rebecca Chesworth, senior ETF strategist at SSGA said. “We have developed a fund with exclusion criteria based on investor demand. The screens are based on the responsible policies of leading asset owners and aim to reduce reputational and idiosyncratic risks.”
The index methodology has also incorporated a fast exit feature, which means if a company
is reported by RepRisk, an ESG data science company, to have violated its indicator
threshold, it will be removed from the index within two business days.
Backtested historical performance suggests the ESG index’s returns outperform the benchmark but experience slightly higher volatility.
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