The events and developments of 2020, including the global Covid-19 pandemic, a strong Black Lives Matter movement, and unusual weather events, have fast-forwarded consideration of the concepts involved and widespread acceptance of ESG (Environmental Social Governance).
Boards and C-suites are taking notice. Most S&P 500 companies now address ESG in their earnings calls. In late 2020 and early 2021 a number of multinationals announced commitments to ensure a more equal workplace. Entire nations are committing to carbon neutrality and a growing number of high-profile companies are also making commitments to reduce carbon emissions and become carbon neutral by a specific date in the race to zero emissions. Notable examples include China’s 2060 commitment, the United States’ 2050 goal under the Biden administration, the UK’s and the European Union’s 2050 goal, Amazon’s 2040 commitment, Apple’s 2030 commitment, and BP’s 2050 pledge.
Interest and adoption of ESG investing has absolutely exploded over the last couple of years. Shareholders are increasingly voting (by investing) with their conscience and demanding that companies and boards be held accountable for their Environmental, Social and Governance actions and impact.
Now may be the time to consider an investment in an ESG ETF with global exposure as the market continues to grow at a rapid rate, worldwide. In this article we’ll explore two socially responsible ETFs that cater to ESG investors looking for global exposure.
iShares ESG Advanced MSCI EAFE ETF (DMXF)
The iShares ESG Advanced MSCI EAFE ETF seeks to track the investment results of an index composed of large- and mid-capitalization developed market companies excluding the U.S. and Canada that have a favorable environmental, social and governance rating while applying extensive screens for company involvement in controversial activities.
In constructing the portfolio, companies in the broad MSCI EAFE Index are rated based on their ESG risk and opportunities management, and controversies scores (0-10, 10 being the most desirable). Securities that have a BBB-rating or above and a score of 3 or above are selected for the portfolio. Companies excluded are those involved in adult entertainment, alcohol, gambling, tobacco, GMO, weapons, nuclear power, firearms, for-profit prisons, and predatory lending, based on revenue thresholds. Companies in the energy sector and industry tied to fossil fuel are also screened out. The index is market-cap weighted with quarterly review for rebalance.
- Weighted Average Market Cap $54.18BB
- Price/ Earnings Ratio 31.87
- Price/ Book Ratio 2.02
- 52-week Performance N/A
- 12-week Performance +4.57%
- YTD Daily Total Return 2.46%
- Yield N/A
- Expense Ratio (net) 0.12%
- Net Assets 95.32M
- Number of Holdings 533
- Top Countries Japan, France, U.K.
iShares ESG MSCI EM Leaders ETF (LDEM)
LDEM provides broad exposure to large- and midcap emerging-market firms with favorable ESG characteristics. The investment seeks to track the investment results of the MSCI EM Extended ESG Leaders 5% Issuer Capped Index.
Selection for the portfolio begins with the components of the MSCI Emerging Markets Index. The fund then excludes securities of companies involved in the business of alcohol, tobacco, gambling, nuclear power and weapons, producers and major retailers of civilian firearms, based on revenue thresholds. Companies that make the cut receive an ESG score based on relevant ESG criteria for their sector. Within each sector, the index selects the highest ESG-rated stocks and weights them by market-cap, until the accrued market-cap reflects 50% of the parent index sector, with single security caps of 5%. This effectively screens out ESG laggards. The Index is reviewed annually in May.
- Weighted Average Market Cap $160.23B
- Price/ Earnings Ratio 26.79
- Price/ Book Ratio 2.12
- 52-week Performance +60.58%
- YTD Daily Total Return 5.11%
- Yield 1.82%
- Expense Ratio (net) 0.16%
- Net Assets 845.7M
- Number of Holdings 433
- Top Countries Hong Kong, Taiwan, India
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