Daily ETF Watch: Global X Plans ESG Fund

Another firm files for a socially responsible ETF.

Reviewed by: Heather Bell
Edited by: Heather Bell

Global X has filed for an ETF that will target North American companies that operate in a manner that is “sustainable and responsible,” according to the prospectus. The Global X Conscious Companies ETF tracks an underlying index provided by Concinnity Advisors that covers companies with market capitalizations of more than $2 billion that have been identified through a three-step process.

The process is designed to encompass five types of stakeholders that are affected by the decisions a company makes, the prospectus said: customers, employees, suppliers, stock and debt holders, and communities where a company has its operations. The first step involves screening and scoring companies on how they create “positive outcomes” for each one of those stakeholder types. This typically reduces a universe of 1,100-1,400 companies to 600-700 companies—basically eliminating half of the original universe.

Next, companies are subjected to a “composite analysis” that scores them based on hundreds of criteria relating to issues of personnel, customer relations, human rights and financial reporting. All but the highest-scoring companies are screened out, which narrows the selection universe down to 300-350 companies.

From there, the index methodology selects the remaining companies that have passed through the screening process for the past three-consecutive years or longer as its components. The prospectus notes that as of mid-March, the index included 115 companies.

There has been a wave of socially responsible and ESG-related filings in the past few years, including some funds that have actually launched and apparently hit a sweet spot with investors. For example, the SPDR SSGA Gender Diversity ETF (SHE) just launched a month ago, and it currently has nearly $270 million in assets under management.

The Global X filing did not include a ticker or expense ratio, nor did it mention a listing exchange.

China Bond Fund To Close
Global X also said that it will be closing one of its ETFs. The Global X GF China Bond ETF (CHNB) will be liquidated after its last day of trading on April 18. The fund covers China’s investment-grade sovereign debt market. It launched in 2014 and currently has some $22 million in assets.

Contact Heather Bell at [email protected].

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.