State Street Global Advisors (SSGA) is set to launch a European equity ETF with an environmental, social and governance (ESG) tilt,
The SPDR STOXX Europe 600 ESG Screened UCITS ETF (600X) is listed on Borsa Italiana, Euronext and Xetra (ZPDX) with a total expense ratio (TER) of 0.12%.
600X is the first ETF to offer investors exposure to the STOXX 600 ESG-X index, which is made-up of 600 large, mid and small cap companies across 17 countries in Europe.
The index follows an exclusion process removing any stocks related to controversial weapons, tobacco, thermal coal and companies that do not comply with the United Nations Global Compact principles.
The top 10 companies in the parent benchmark excluded from the index are Novartis, British American Tobacco, Airbus, Safran, Volkswagen Pref, Imperial Brands, BAE Systems, Rolls Royce, RWE and Atlantia.
Furthermore, 600X has a “fast exit” feature to react to breaking ESG controversies. If a stock’s Sustainalytics controversy risk rating is raised to level 5, it will be removed from the index two dissemination days after the announcement.
Rebecca Chesworth (pictured), senior equity strategist, SPDR, at SSGA, commented: “No longer considered a niche option, sustainable investing is now one of the fastest growing areas of ETF product development in Europe and the ESG ETF landscape is evolving quickly in response to investor demand for ESG inclusion.”
Mandy Chiu, head of SPDR ETF product for EMEA and APAC, at SSGA, added: “As fund innovation responds to new capabilities and investor demands, we expect a broader ETF offering to develop.
“With a growing body of academic research showing a positive relationship between high ESG scores and performance, we expect the number of ESG ETFs to rise as Europe continues to lead the way in ESG thinking.”
Equity and commodity ETF market maker Optiver is supporting the initial listing of the 600X and will be the lead market maker on the product.
Kjelle Blom, COO at Optiver, said: “Sustainable investing is a positive development in the industry and Optiver supports the growth of ESG ETFs.”