Environmental, social & governance (ESG) has become the investing buzz phrase in 2020 as the new theme for investors.
- Environmental metrics cover climate risks, natural resources scarcity, pollution and waste, and environmental opportunities.
- Social metrics include labour issues and product liability, risks such as data security, and stakeholder opposition.
- Governance refers to items relating to corporate governance and behaviour such as board quality, diversity and effectiveness.
A 2019 Delliot survey found that globally, 75% of both retail and institutional investors apply ESG principles to at least a quarter of their portfolios and the amount of money being invested using these principles in 2018 was US$46trillion and is expected to grow to almost S$70trillion by 2025.
Further evidence continues to support the claim that higher ESG scores result in better profitability for companies and as such investors will benefit with improved share price and dividend returns over time.
With this in mind, Satrix listed two new ESG Exchange Traded Funds (ETFs) earlier in September. The Satrix MSCI World ESG Enhanced ETF for developed markets and the Satrix MSCI Emerging Markets ESG Enhanced ETF for emerging markets.
Satrix MSCI World ESG Enhanced ETF
The US is 66% of the fund with Japan 7.4%, UK 3.89% and Canada 3.2%.
IT is the top sector with Apple, Amazon, Facebook, Microsoft & Alphabet the top five holdings.
Satrix MSCI EM ESG Enhanced ETF
This is also a feeder fund but will pay dividends and has a target TER of 0.46% and the code is STXEME.
China is the largest market at 40% followed by Taiwan at 13.9% and South Korea at 11.4%.
Top holdings are Alibaba, Tencent, Taiwan Semi Conductor and Samsung with even Naspers coming in at 1.29%.
Investors wanting to buy either of these two ETFs should note a large amount of overlap between these ETFs and generic offshore and emerging market ETFs.
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.
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