Dimensional Launches First Sustainable ETFs

Dimensional Fund Advisors announced the launch of three sustainability exchange-traded funds Wednesday, marking the firm’s first expansion into environmentally conscious ETF investing.  

The new additions bring the firm’s total ETF offerings to 27—a portfolio that manages around $64 billion in assets, despite Dimensional launching its ETF arm just two years ago. 

The US Sustainability Core 1 ETF (DFSU), the International Sustainability Core 1 ETF (DFSI) and the Emerging Markets Sustainability Core 1 ETF (DFSE) are designed to provide broad diversified exposure to equities that have climate-focused sustainability initiatives, while also seeking higher expected returns. 

“We believe investing well and incorporating values around sustainability need not be mutually exclusive,” Dimensional Senior Investment Strategist, Isabelle Williams, wrote in an email to ETF.com. 

Sustainable investing remains a lucrative investment despite accelerating pushback from firms that claim to put profits over environmental priorities, according to recently released data.  

A 2022 report published by PwC found growth in the sector is expected to outpace the asset and wealth management market as a whole, with ESG assets under management in the U.S. likely to double to $10.5 trillion by 2026. In fact, 60% of the institutional investors surveyed reported that ESG has already resulted in higher yields in their investment performance.    

The Austin, Texas-based financial advisor—which manages $540 billion in assets overall—has a four-decade-long history. Though this launch marks the firm’s foray into sustainable ETFs, it has been investing in the environmentally conscious space for nearly 15 years.  

Williams added that though Dimensional’s research shows there is no strong evidence that ESG factors alone are a systematic source of higher returns or lower risks, “ESG considerations can be integrated into diversified portfolios that target higher expected returns.” 

The three new funds compete with other sustainability ETFs already in the market, such as the iShares USD Green Bond ETF (BGRN), the BNY Mellon Sustainable International Equity ETF (BKIS) and the Janus Henderson International Sustainable Equity ETF (SXUS), among others. 

All three ETFs—DFSU, DFSI, DFSE—list on the NYSE Arca, and come with expense ratios of 0.18%, 0.24% and 0.41%, respectively. 

Dimensional has also filed for a global fixed income sustainability ETF, which it plans to launch later this month. 

Contact Zoya Mirza at [email protected]