State Street Rolls Out ESG Version of Popular ETF
Unlike the $285-billion SPDR S&P 500 ETF Trust, the new fund excludes firms tied to tobacco or "controversial weapons," says the fund firm.
State Street Global Advisors added to the growing number of environmental, social and governance-focused exchange-traded products with Tuesday’s trading of the SPDR S&P 500 ESG ETF.
How does the new fund differs from the popular SPDR S&P 500 ETF Trust — which has over $285 billion of assets and trades as SPY?
First, it excludes S&P 500 companies “involved in tobacco or controversial weapons or [with] a relatively low United Nations Global Compact Score or S&P Dow Jones Indices ESG Score,” Brie Williams, head of Practice Management at State Street Global Advisors, told ThinkAdvisor Wednesday.
Also, State Street ranks companies by their S&P DJI ESG Score within each industry group for inclusion in the new fund.
Information technology accounts for about 28% of the new ETF’s portfolio, with top holdings including Microsoft, Apple, Amazon, Facebook and Google parent Alphabet. SPY’s IT holdings represent about 27% of its current portfolio.
Expenses, Other Details
The new ESG ETF offers investors “an opportunity to tap into ESG investing at the core of their portfolio with an expense ratio of just 10 basis points,” according to State Street, which manages some $4.5 trillion assets.
Indeed, the new State Street fund’s expense ratio is lower than several other ESG-focused ETFs, including the Vanguard ESG U.S. Stock ETF, which has a net expense ratio of 0.12%.
The VanEck Vectors Green Bond ETF (0.20% net expense ratio) became the first U.S.-listed fixed income ETF to provide targeted exposure to the green bond category when it launched in 2017.
State Street, which already has several index ESG ETFs, also has filed an application with the Securities and Exchange Commission to trade its first actively managed ESG ETF.
BlackRock’s iShares also recently said it was expanding its ESG ETF offerings.