State Street Global Advisors (SSGA) has launched SPDR S&P 500 ESG Screened Ucits ETF. The fund will list on Xetra on 3 December 2019, Euronext Amsterdam and Borsa Italiana on 4 December 2019 and on SIX in due course.
The SPDR S&P 500 ESG Screened Ucits ETF will track the newly launched S&P 500 ESG Exclusions II Index, which offers investors exposure to the flagship S&P 500 Index with an ESG screen.
The index methodology has been devised to exclude companies based on data from Sustainalytics, a leading independent provider of ESG and corporate governance research and ratings. It is reviewed quarterly and components are free-float market cap-weighted. It aims to offer a low tracking error and similar risk-return characteristics to the S&P 500 Index
The exclusion criteria aims to eliminate exposure to controversial weapons, civilian firearms, tobacco and thermal coal, as well as companies that do not comply with the Ten Principles of the UN Global Compact. Companies that are deemed non-compliant with the UNGC principles, as identified by Sustainalytics, will be excluded from the eligible universe. A total of 36 stocks in the S&P 500 are currently excluded by the index screening process.
The index methodology is also notable for its ‘fast-exit' feature. If a company is reported by RepRisk, an ESG data science company, to have violated its RepRisk Index (RRI) indicator threshold of 70, it will be removed from the index within two business days.
"The S&P 500 Index is one of the most popular indices amongst equity investors, with over $125bn of assets tracking the benchmark in Ucits ETFs alone. Subsequently, there is strong demand for an ETF linked to this index with ESG overlay. 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," said Rebecca Chesworth, senior ETF Strategist at State Street Global Advisors.
The SPDR S&P 500 ESG Screened Ucits ETF has a TER of 0.10% per annum.
The resulting portfolio of stocks in the new SPDR ETF has a low tracking error (0.58% annualised over the last 10 years) and similar performance characteristics to the parent S&P 500 benchmark. The active weight by sector is less than 3 percent in all cases (the largest being Information Technology at +2.24%, followed by Industrials at -1.89%).