BEST NEW ETF, U.S. EQUITY ETF, ESG ETF
WINNER: iShares ESG MSCI USA Leaders ETF (SUSL)
The iShares ESG MSCI USA Leaders ETF (SUSL) drew a lot of attention when it launched last May, as it was one of two ETFs backed by Finland mutual pension insurer Ilmarinen. SUSL quickly crossed the $1 billion assets mark less than one month after its rollout to become the biggest launch of the past 15 years.
It was perhaps one of the most unexpected horse races of the year: two ESG ETFs vying for the title of largest launch. But SUSL has pulled ahead of its virtual doppelganger—the Xtrackers MSCI U.S.A. ESG Leaders Equity ETF (USSG), which tracks a virtually identical index—in terms of assets, and has significantly higher liquidity.
SUSL tracks an index derived from the MSCI USA Index and offers exposure to large- and midcap U.S. firms with favorable ESG traits relative to their sector peers. It automatically excludes companies with significant involvement in the tobacco, alcohol, gambling, nuclear power and weapons industries. The remaining companies are evaluated using 37 environmental, social and governance (ESG) factors. The index methodology selects the top-ranked securities based on ESG scores for each sector until 50% of the sector weight in the parent index is represented.
The ETF tracks almost exactly the same index as USSG. However, it has stricter exclusions related to civilian firearms, and requires its components to have slightly higher ESG scores and ratings than the methodology of USSG’s underlying index. Currently, both ETFs have the same number of components (roughly 300) and similar component lists. On the surface, these funds are essentially identical, but SUSL bulked up much more quickly than its counterpart.
Essentially, it represents the best-in-class securities from its parent index with regard to ESG principles. One could even argue that it’s one of the purest examples of ESG exposure available in an ETF wrapper. Indeed, it has an MSCI ESG Rating of AA, a notch below the highest possible rating of AAA, which is held by only a few ETFs, most of which are not marketed as ESG funds. For all of these reasons, it’s no surprise that SUSL has netted a trifecta of awards: Best New ETF – 2019, Best New U.S. Equity ETF – 2019 and Best New ESG ETF – 2019.