State Street Global Advisors has launched SPDR STOXX Europe 600 ESG Screened Ucits ETF.
The fund is the first ESG ETF strategy based on STOXX Europe 600 that follows transparent exclusion criteria. It aims to eliminate exposure to controversial weapons, tobacco and thermal coal, and companies that do not comply with United Nations Global Compact (UNGC) principles. The fund lists on Xetra, Borsa Italiana and Euronext from 30 September 2019.
The STOXX Europe 600 index, a key benchmark for pan-European exposure, represents large, mid and small capitalisation companies across 17 countries in the European region.
The STOXX 600 ESG-X index (launched in 2018) adopts exclusion criteria based on data from Sustainalytics - a leading ESG ratings provider that screens stocks based on the responsible policies of leading asset owners and aims to reduce reputational and idiosyncratic risks.
The ETF, which has a TER of 0.12 percent, also has a ‘Fast Exit' feature to react quickly to breaking ESG controversies. If an index constituent has its Sustainalytics controversy risk rating raised to Level 5 (high risk), it will be deleted from the index two dissemination days after the announcement is made.
The resulting portfolio of stocks in the new SPDR ETF has a low tracking error (0.48 percent annualised over the last five years) and similar performance characteristics to the STOXX Europe 600 index.
The active weight by sector is less than 2 percent in all cases (the largest being Health Care at -1.68 percent, followed by Financials at +1.32 percent).