State Street Global Advisors (SSGA) is switching the index on its S&P 500 ESG ETF to one with more exclusion metrics.
The SPDR S&P 500 ESG Screened UCITS ETF (SPPY), which currently houses $562m in assets under management (AUM), will switch from tracking the S&P 500 ESG Exclusions index to the S&P 500 ESG Leaders index.
As a result of the switch, the ETF will change its name to the SPDR S&P 500 ESG Leaders UCITS ETF under the same ticker.
The new index seeks to exclude issuers based on a broader set of ESG characteristics than the current index, considering their ESG rating and their involvement in certain controversial business activities.
Under the current index, SPPY screens out securities based on their exposure to controversial weapons, civilian firearms, tobacco, thermal coal and companies deemed not compliant with the United Nations Global Compact principles.
However, the leaders index will see SPPY introduce a float-adjusted market capitalisation, defined by individual sector’s ESG score.
Companies will be selected on a decreasing order of their S&P Dow Jones Indices ESG Score until 40% of the float-adjusted market capitalisation of the same industry group of the S&P 500 is reached. Furthermore, companies will not exceed a weight cap of 5% of the total index.
The ETF will continue to be labelled Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).
In shareholder notice, the issuer said: “The aim of the change of index is to provide shareholders with an exposure to US equity market performance of large cap equity securities via a new index which employs a ‘best in class’ ESG methodology.”
UBS Asset Management currently offers the most extensive set of ESG exclusions on an S&P 500 index through the UBS ETF S&P 500 Elite UCITS ETF (S5EG) which tracks the S&P 500 ESG Elite index.