Legal & General Investment Management (LGIM) has launched a suite of three dividend ETFs with quality screens and responsible exclusions.
The L&G Quality Equity Dividends ESG Exclusions UK UCITS ETF (LDUK), L&G Quality Equity Dividends ESG Exclusions Europe ex-UK UCITS ETF (LDEU) and L&G Quality Equity Dividends ESG Exclusions Asia Pacific ex-Japan UCITS ETF (LDAP) are listed on the London Stock Exchange. LDUK and LDEU have total expense ratios (TERs) of 0.25% while LDAP has a TER on 0.40%.
All three of the strategies aim to replicate the performance of FTSE Russell quality-screened dividend growth indices targeting their respective geographical exposures.
The ETFs also employ an ESG screen which targets companies that score well from a sustainable perspective, are consistent dividend payers and quality screened to exclude those with poor return profiles.
The quality screen is calculated by FTSE Russell as a geometric average of company earnings, assessing profitability and cash components, asset growth and leverage metrics.
The dividend screen identifies stocks with a history of consistent and rising shareholder income distribution, and those with a higher consensus forecast on increasing dividend yields in future.
Finally, the ESG screen not only excludes companies in breach of the UN Global Compact and controversial sectors but also those exposed to material financial risks as a result of their business models.
The ETFs also apply an active ownership approach to basket constituents and seeks to use its in-house investment stewardship team to engage with companies on ESG concerns.
Howie Li (pictured), head of ETFs at LGIM, commented: “We look to identify those quality companies that can sustain a consistent dividend and thus believe that this fund range is a powerful proposition for investors seeking to address their search for income, desire for growth potential, and an increasing awareness of ESG risks.”
James Crossley, head of UK retail sales at LGIM, added: “Dependable income is something investors are crying out for in the current environment, but some stocks with high dividend yields may be value traps with poor fundamentals and weak growth prospects.
“We believe that in giving investors exposure to a range of quality companies, with strong dividend characteristics and avoiding material ESG risks, we are well-positioned to help them generate consistent income in their portfolios.”
The addition of LDUK, LDEU and LDAP takes LGIM’s total ETF product count to 41. In recent months, the company has been building up its roster of ESG fixed income ETFs, with its most recent addition being the L&G ESG Green Bond UCITS ETF (GBND).