While more international ESG index/passive options have become available over the past several years, just one ETF currently meets this survey’s criteria.
This fund, initially created for the United Nations Joint Staff Pension Fund, is more global than international. It tracks the MSCI ACWI Global Low Carbon Target Index, which seeks a lower carbon exposure than that of the broad market by overweighting companies with low carbon emissions (relative to sales) and with low potential carbon emissions (per dollar of market capitalization).
The index includes large-cap and midcap stocks across 23 developed markets and 23 emerging markets, and it includes U.S. companies, which currently represent about 50% of the portfolio. CRBN traded within ± 0.50% of its NAV 91% of the time during the quarter ending Sept. 30 (versus 100% of the time for the domestic ETFs listed above).
As with all international ETFs, this may be due in part to the difference in closing times for domestic and international markets. CRBN has a 0.20% expense ratio and about $320 million under management.
Several new broad-based ETFs are currently in registration with the SEC, from established asset managers such as BlackRock and Goldman Sachs, and Nuveen (now a subsidiary of TIAA), launched five new such ETFs last week.
Each of the major indexing groups—namely FTSE Russell, MSCI and S&P Dow Jones—has comprehensive suites of ESG indexes, presenting a wide array of licensing opportunities for potential new funds.
Although it is encouraging to see more alternatives become available, some noticeable asset class gaps remain to be filled with funds that are relatively low-cost and that have garnered sufficient asset heft to ensure a decent probability of staying power.
That said, should the current growth trajectory of ESG investing continue, these gaps hopefully should be filled over time, making it even easier to incorporate one’s values into a broadly diversified cost- and tax-efficient asset allocation plan.
Lorne Abramson, CFA, CFP is a principal and co-founder of ELM Advisors, a portfolio and wealth management firm located in Burlingame, California. Elana Lieberman is a principal and co-founder of ELM Advisors.