Sustainable investing is in vogue with environmental, social and governance (ESG) investing forming a strong pillar of the platform. Per a 2018 survey conducted by Morgan Stanley (NYSE:MS), around 75% asset managers confirmed the adaptation of sustainable investing by their firms. This figure is up 10% from 2016 levels. In fact, the sustainable funds’ ETF gamut in 2018 gained more than $2 billion in net flows. Moreover, between 2016 and 2018, around 52 ESG ETFs were launched in the United States (read: 6 ESG ETFs Beating SPY (NYSE:SPY) This Year: Is There More Room to Run?).
The world's largest ETF issuer, iShares’ sustainable investing platform has garnered more than $9 billion in iShares ESG ETF assets across the globe (as of Mar 31, 2019). On May 7, iShares launched the iShares ESG MSCI USA Leaders ETF SUSL with more than $800 million in investment from Finland’s major pension insurance company — Ilmarinen. With the introduction of SUSL, iShares now offers 10 ESG ETFs.
SUSL in a Nutshell
Per etf.com, SUSL has earned the honor of the largest ETF launch in the past 15 years, beating Xtrackers MSCI U.S.A. ESG Leaders Equity ETF’s USSG record.
SUSL aims at tracking the performance of the MSCI USA Extended ESG Leaders Index. The index consists of U.S. large and mid-cap stocks of companies with high ESG ratings within their industry.
Comprising 335 holdings, Information Technology (24.92%) followed by Health Care (12.82%) and Financials (11.94%) form the top three sectors with the highest weightings within SUSL. Having entered the market on May 7, it has gathered net assets of $850.3 million. The fund charges a fee of 15 basis points a year.
SUSL’s top three holdings are Microsoft Corp (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ) and Alphabet (NASDAQ:GOOGL) Inc Class C, with 6.99%, 2.82% and 2.71% exposure, respectively.
What Makes SUSL an Attractive Pick?
Marked by continued technological advancement and digital revolution, there has been growing awareness about ESG among investors along with increasing seriousness toward it among companies. In this regard, BlackRock’s global head of sustainable investing, Brian Deese said, “technological innovations and growing access to data are making it easier to integrate ESG characteristics into investing strategies, which means more companies will be evaluated—and invested in—according to their ability to implement sustainable business practices.”
Moreover, investors appear to be bothered about the future of the environment and the effect it might have on their investing portfolio. This is because lesser focus on environmental issues by the companies may result in lawsuits, fines and damages, per the source.
ETF Competition
The fund faces tough competition owing to its focus on U.S. companies with good ESG ratings. Below we discuss a few ETFs that seek to provide exposure to ESG investing:
Xtrackers MSCI USA ESG Leaders Equity ETF USSG
The fund tracks the investment results that correspond generally to the performance of the MSCI USA ESG Leaders Index. Notably, the MSCI USA ESG Leaders Index is comprised of large and mid-cap companies in the U.S. market and provides exposure to companies with superior ESG performance in comparison to their sector peers. The fund has 338 holdings with an AUM of $871.5 million. The fund charges 10 bps in fees (read: Successful ETF Launches of First Quarter).
Vanguard ESG U.S. Stock ETF ESGV
The fund tracks the performance of the FTSE US All Cap Choice Index comprising of large, mid, and small-capitalization stocks. It does not include companies operating in adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling, and nuclear power industries. It also doesn’t consider companies not meeting U.N. global compact principles and diversity criteria. The fund has 1573 holdings with an AUM of $400.3 million. It charges 12 bps in fees (read: 10-Year Bull Market to Rage Ahead in 2019: 10 ETF Bets).
iShares ESG MSCI USA ETF ESGU
The fund seeks similar risk and return to the MSCI USA Extended ESG Focus Index while achieving a more sustainable outcome. The fund provides exposure to higher rated ESG companies while accessing large and mid-cap U.S. stocks. The fund has 326 holdings with an AUM of $218.3 million. It charges 15 bps in fees.
Nuveen ESG Large-Cap Growth ETF NULG
The underlying TIAA ESG USA Large-Cap Growth Index comprises large-cap equity securities and meet ESG criteria and exhibit overall growth style characteristics based on long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend & long-term historical sales per share growth trend. The fund has 128 holdings with an AUM of $58.4 million. It charges 35 bps in fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Vanguard ESG U.S. Stock ETF (ESGV): ETF Research Reports
iShares ESG MSCI USA ETF (ESGU): ETF Research Reports
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): ETF Research Reports
ISHR-ESG USA LD (SUSL): ETF Research Reports
Nuveen ESG Large-Cap Growth ETF (NULG): ETF Research Reports
Original post
Zacks Investment Research