In what may be just what the scuffling marketplace of exchange traded fund focusing on environmental, social and
governance principles needs, Vanguard entered the ESG ETF arena Sept. 19 with two new products.
The ETFs are the Vanguard ESG U.S. Stock ETF (CBOE: ESGV) and Vanguard ESG International Stock
ETF (CBOE: VSGX).
What Happened
Finding ESG ETFs is not difficult; in terms of sheer size, that universe is rapidly expanding. Finding truly successful ESG ETFs
is a another story. Prior to Vanguard introducing its ESG ETFs, there were 50 such funds trading in the U.S. with just $6 billion in
combined assets under management, with a significant portion of that $6 billion allocated to just a handful of funds.
Time will tell if Vanguard can shake up the ESG space, but most of Vanguard's additions to its ETF roster tend to prove
successful in attracting investor assets.
Why It's Important
Market observers speculate that one reason some ESG ETFs are not gaining traction with investors is higher fees. Bloomberg's
Eric Balchunas said the average fee on ESG
ETFs is 0.5 percent per year, or $50 on a $10,000 investment.
Cheaper ESG ETFs are proving to be the better asset gatherers in the category. The new Vanguard funds are inexpensive relative
to the broader ESG ETF space. The Vanguard ESG U.S. Stock ETF and the Vanguard ESG International Stock ETF charge 0.12 percent per
year and 0.15 percent per year, respectively.
The new “funds exclude companies involved in the production of alcohol, tobacco, gambling, adult entertainment, weapons, fossil
fuels and nuclear power,” according to Vanguard. “The
construction methodology also excludes companies that do not meet certain diversity criteria, as well as the labor, human rights,
anticorruption and environmental standards defined by the U.N. Global Compact Principles.”
What's Next
ESGV, Vanguard's domestic ESG ETF, tracks the FTSE US All Cap Choice Index. The index allocates about 40 percent of its combined
weight to the technology and health care sectors. Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc. (NASDAQ: AMZN) are among that new ETF's top 10 holdings.
The Vanguard ESG International Stock ETF targets the FTSE Global All Cap ex U.S. Choice Index. Financial services, industrials
and consumer discretionary are among that benchmark's largest sector weights. Japan, the
U.K. and Canada are among the largest geographic exposures in the new ETF.
Related Links:
This ETF Started The Bond
Revolution
A Nifty
Multi-Asset ETF
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.