Industry Updates

State Street's European equity ETF to ditch ESG index for SRI

ZPDX becomes the ninteenth ETF to switch to a greener index within the past month

Jamie Gordon


State Street Global Advisors (SSGA) is set to switch its Europe equity ESG-screened ETF for a socially responsible investing (SRI) mandate. 

Effective from 30 November, the SPDR STOXX Europe 600 ESG Screened UCITS ETF (ZPDX) will become the SPDR STOXX Europe 600 SRI UCITS ETF and will shift from tracking the STOXX Europe 600 ESG-X index to the STOXX Europe 600 SRI index

Its current benchmark excludes companies Sustainalytics considers at odds with Global Standards Screening and those involved in controversial weapons, tobacco production and those deriving revenues or power generation from thermal coal extraction or exploration. 

Going a step further, the SRI index applies these sector exclusions, as well as exclusions for companies involved in alcohol, adult entertainment, all weapons, gambling, oil and gas, and nuclear power. 

In addition, companies that rank in the top 10% in terms of emission intensities are not included. After these steps, the remaining securities are ranked according to their ESG scores within each of the 11 ICB Industry groups. 

The index then selects the top-ranking securities in each of the sectors until the total number reaches a third of the number in the parent index. 

The firm said the ETF will remain classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR) but did not specify whether the benchmark and name change would be accompanied by changes to the product’s ticker or total expense ratio (TER). 

A spokesperson said in a statement: "To make this ETF as robust as possible, we wanted to ensure it was built to maximise the likelihood of retaining its current Article 8 status under SFDR – by no means guaranteed for ESG screened products – and in addition, take the opportunity to make the fund compatible with the Autorité des marchés financiers’ (AMF) strong commitment to sustainable finance."

Just over a fortnight ago, SSGA gave an ESG makeover to its SPDR Bloomberg Barclays 0-5 Year U.S. High Yield Bond UCITS ETF (SJNK), which became the SPDR Bloomberg SASB U.S. High Yield Corporate ESG UCITS ETF on 29 October

This came as part of a total of 18 European ETF shifts to greener indices over the past month, with other changes occurring on ETFs from UBS Asset Management, BlackRock, DWS and Lyxor. 

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