A recent filing from Nuveen outlines the firm’s plans to expand its lineup of funds focused on environmental, social and governance (ESG) criteria. The NuShares ESG International Developed Markets Equity ETF and the NuShares ESG Emerging Markets Equity ETF will join five U.S. ESG ETFs, adding an international dimension to the entirely domestic offering.
Nuveen said when it launched its U.S. ESG funds that they were designed to be core holdings. The five ETFs are derived from MSCI’s broad U.S. index.
Similarly, the developed-markets fund will track an index derived from the MSCI EAFE index, which excludes both the U.S. and Canada. Meanwhile, the emerging markets ETF’s index will draw its components from the MSCI Emerging Markets Index. MSCI maintains and calculates the indexes for the ETFs.
As with the U.S. funds, in the indexes for both proposed ETFs, companies with significant business lines in areas like alcohol, tobacco, military weapons, firearms, nuclear power and gambling will be automatically filtered out, with the remaining names evaluated on an industry-specific basis with regard to a variety of ESG criteria.
From there, companies receive an ESG score, and the index selects companies within a sector from the top ranking on down until it reaches 50% of the market cap of the sector in the parent index. MSCI uses an optimization process to weight components so that the fund’s index reflects the sector weightings of the parent index, the prospectus said.
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