These 5 Socially Responsible ETFs Meet The Grade

December 19, 2016

SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)

This relative newcomer was launched in November 2015 and currently has just over $235 million in net assets. SPYX was developed with the support of the Natural Resources Defense Council (NRDC) to meet the needs of climate-conscious investors.

NRDC is a cornerstone investor in the fund, which aims to create an effective vehicle to invest in S&P 500 companies that do not own fossil fuel reserves. The S&P 500 Index serves as the fund’s initial universe of eligible securities, which is then screened to exclude companies with any ownership of fossil fuel reserves, including for third-party and in-house power generation. The index is weighted by float-adjusted market capitalization.

At this point, SPYX purchases a representative sampling—rather than all—of the companies in the underlying index. It currently has approximately 480 holdings. As one would expect, SPYX is underweighted in the energy sector relative to the S&P 500; conversely, it is overweight in technology and health care. SPYX, with $114 million in assets, has a gross expense ratio of 0.25%, and average trading volume of about 12,100.

SPDR SSGA Gender Diversity ETF (SHE)

Launched in March 2016, this fund tracks State Street’s proprietary SSGA Gender Diversity Index, which is designed to invest in U.S. large-cap companies that are “gender diverse,” meaning companies that exhibit gender diversity in their senior leadership positions.

The California State Teachers’ Retirement System seeded this ETF with an initial $250 million investment and it has more than $290 million in assets. The fund seeks to minimize divergence from the sector weighting of the 1,000 largest listed U.S. companies. Given the current composition of executive boardrooms, however, it is significantly underweight in the technology sector and overweight in health care.

Currently, there are approximately 185 holdings. It has a 0.20% gross expense ratio, with average trading volume of about 29,000.

As with any ETF, investors should be mindful of costs other than expense ratios, including brokerage commissions and bid/ask spreads. Indeed, bid/ask spreads are particularly relevant in the case of the four ETFs just described, because they trade with relatively light volume.

ETFs are also bought and sold at market prices, which can differ from underlying net asset values (NAVs). However, these four ETFs comprise comparatively large, liquid stocks, and not surprisingly, all traded within 0.50% of their NAV for the quarter ending Sept. 30, 2016.


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