SYDNEY, 27 July 2020 State Street Global Advisors, the asset management arm of State Street Corporation (NYSE: STT), is expected to list a new environmental, social and governance (ESG) ETF on the Australian Stock Exchange (ASX) on Wednesday 5 August 2020.
Management costs for the ETF are 0.13 per cent per year, meaning it will be one of the lowest cost ESG ETFs available to investors in Australia.1
The SPDR S&P/ASX 200 ESG Fund (Ticker: E200) is the first ETF to track the S&P/ASX 200 ESG Index, a broad-based, market-cap-weighted index designed to measure the performance ofsecurities meeting sustainability criteria, while maintaining similar overall industry group weights as the S&P/ASX 200 Index.
This means for the first time, investors will be able to access improved ESG exposure with a similar risk-return profile to the Australian equity market benchmark, the S&P/ASX 200 Index.
E200 benefits from exclusionary screening and best in class rankings to improve ESG characteristics. It screens out companies involved in the tobacco and controversial weapons industries, and companies with low ESG scores. Top ranking ESG companies relative to industry peers are also included.
Globally, 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.2
Head of SPDR ETF Asia Pacific Distribution Meaghan Victor said ESG investing is no longer a niche reserved for a select few.
“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,” Ms Victor said.
“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 provides a sustainable alternative to the SPDR S&P/ASX 200 Fund (Ticker: STW), which is a staple investment for many institutions, advisers, and retail investors,” she said.
ESG investing is the assessment of material environmental, social and governance issues during the investment process to complement traditional research, like analysing financial statements, industry trends, and company growth strategies.
The ESG characteristics of the new ETF are incorporated into the index it tracks through exclusions and rankings.
The S&P/ASX 200 ESG Index excludes companies involved in tobacco and controversial weapons, companies with low UNGC Scores3, and the lowest 25 per cent of companies within industry groups, ranked by S&P DJI ESG Scores4.
The securities are market cap weighted so they represent 75 per cent of the market capitalisation of each industry group in the S&P/ASX 200 Index. This is what will give the fund a similar risk-return profile to the S&P/ASX 200 Index.
“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 20205,” Ms Victor 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,” she said.
A new global report on consumer sentiment, purpose and sentiment in wealth management: State Street Global Advisors Individual Investors 2019 Study6 found that the majority of investors now say ESG influences their investment decisions. More than 60 per cent of investors in the US, Australia and the UK agree that a company’s social, political or environmental impact always or sometimes influences their decisions to invest.
The research shows that in Australia, 64 per cent of investors want financial advisers to offer them advice on how they can invest through ESG.
“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,” Ms Victor said.
1 As classified by Morningstar Direct, the average management fee of socially conscious ETFs available in Australia is 0.53% p.a. as at 17 July 2020.
2 State Street Global Advisors, ESG Investing: From Tipping Point to Turning Point, July 2020
3 The United Nations Global Compact is a non-binding United Nations pact to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation.
4 S&P DJI ESG Scores are backed by 20 years of investment performance data and annually capture company ESG issues, financial impact of ESG exposures and implementation to manage ESG risks.
5 ASX Monthly Investment Product Report, as at 30 June 2020.
6 State Street Global Advisors Individual Investors 2019 Study. A global survey on consumer sentiment, purpose and behavior in wealth management.
Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) ("SSGA, ASL"). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Web: www.ssga.com.
SSGA, ASL is the issuer of interests and the Responsible Entity for the ETFs which are Australian registered managed investment schemes quoted on the AQUA market of the ASX or listed on the ASX.
References to the SPDR S&P/ASX 200 ESG Fund ("the Fund") in this communication are references to a proposed managed investment scheme which has been registered with ASIC. The Fund is intended to be domiciled in Australia, promoted by State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”) is the Investment Manager, in respect of which SSGA, ASL will be the Responsible Entity. This general information has been prepared without taking into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document, which is available at https://www.ssga.com/au/en_gb/individual/etfs/announcements, before deciding whether to acquire or continue to hold units in the Fund.
This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document and target market determination, available at www.ssga.com/au, before deciding whether to acquire or continue to hold units in an ETF.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF's net asset value. ETFs typically invest by sampling an index, holding a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index.
Investing involves risk including the risk of loss of principal.
Diversification does not ensure a profit or guarantee against loss.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio's specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio's ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
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