This year will go down as one that brought increased mainstream-ification of exchange traded funds adhering to environmental, social and governance investing principles not only terms of proliferation, but in terms of asset growth as well.
What Happened
The space got a little bigger Tuesday with the debuts of the IQ Candriam ESG US Equity ETF IQSU and the IQ Candriam ESG International Equity ETF IQSI.
The new ETFs were brought to market by IndexIQ, a unit of New York Life Investments. IQUS, the domestic fund in the pair, follows the IQ Candriam ESG US Equity Index (IQESGUS).
That benchmark “is a broad-based, market-cap weighted index that consists of the top-rated US ESG companies based on Candriam’s ESG criteria. Candriam’s ESG criteria seeks to identify companies that operate in a sustainable and responsible manner,” according to the issuer.
Companies in the index are scored on ESG terms either on an absolute basis or relative to their peers. Top holdings in the new IQSU include Microsoft Corporation MSFT, Apple Inc. AAPL and Amazon.com, Inc. AMZN.
Why It's Important
IQSI, the international member of the pair, could prove to be a well-timed launch because more investors are becoming aware of the benefits of ESG methodologies when applied to international equities.
That new ETF tracks the IQ Candriam ESG International Equity Index (IQESGIN), which employs a similar scoring methodology as its aforementioned domestic counterpart.
“As U.S. investors become increasingly interested in sustainable investing, high-quality ESG strategies with the potential to generate alpha are at a premium,” said David Czupryna, Head of ESG Client Portfolio Management at CANDRIAM, said in a statement. “We are excited to expand our existing partnership with IndexIQ with IQSU and IQSI, which incorporate CANDRIAM’s award-winning ESG criteria to meet the needs of American investors.”
What's Next
As new additions to a growing corner of the ETF space, IQSU and IQSI have to find ways to stand out and the rookie funds are doing just that. IQSU charges just 0.09% per year, or $9 on a $10,000 investment, making it one of the least expensive domestic ESG strategies.
With an annual fee of just 0.15%, IQSI is already one of the cheapest international ESG ETFs on the market.
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