ETF Watch: Nuveen Adds To Socially Responsible Family

June 07, 2017

Today Nuveen is rolling out two ETFs that will complete its family of environmental, social, governance (ESG) funds. The NuShares ESG International Developed Markets Equity ETF (NUDM) and the NuShares ESG Emerging Markets Equity ETF (NUEM) both rely on a similar methodology as Nuveen’s five existing ESG ETFs covering different slices of the U.S. market.

NUDM comes with an expense ratio of 0.40%, while NUEM charges 0.45%. The two funds are listed on the Bats exchange, which is owned by ETF.com’s parent company, CBOE.

“As we designed our latest ETF offering, we wanted to squarely address investors’ desire to diversify their core equity portfolio with investment options that not only provide key benchmark exposure, but also align their international equity investments with their values,” said Martin Kremenstein, the head of ETFs at Nuveen.

As of the end of March, NUDM tracks an index derived from the MSCI EAFE benchmark that covers some 327 securities, while NUEM tracks one adapted from the MSCI Emerging Markets Index that covers 212 securities.

Benchmark Construction

The methodology evaluates and scores companies according to environmental, social and governance-related criteria and automatically excludes those that exceed certain carbon-related and emissions thresholds as well as those involved in controversial business lines such as alcohol, tobacco, weapons, nuclear power and gambling.

Companies are scored and ranked within their industry groups, with the top-ranked companies for each industry selected for inclusion until they represent at least 50% of the industry’s market capitalization in the parent index, the prospectus said.

With the component list determined, the methodology optimizes the weightings of the index so that they reflect the weightings of the parent index, the prospectus noted.The methodology also seeks to reflect the weights of individual countries within the parent index.

In addition to its ESG lineup, Nuveen also focuses on income in its ETF offering, which includes a REIT ETF as well as two “yield enhanced” fixed-income ETFs.

“Both Nuveen and TIAA have their strengths as investment firms and asset managers,” said Jordan Farris, Nuveen’s head of ETF product development, noting that while Nuveen has a strong background in fixed income, parent company TIAA-CREF has a long history in the ESG space.  

'Major Need'

Farris identified income as a “major need” of investors today and pointed out that Nuveen has seen a significant increase in interest in socially responsible strategies, which is addressed by Nuveen’s completed suite of ESG ETFs.

“We’re leveraging the strengths that already exist not only in Nuveen but in our parent company TIAA,” he added.

Contact Heather Bell at [email protected].

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