Industry Updates

VanEck to add ESG screens to semiconductor and hydrogen ETFs

Changes made due to increased demand for ESG investing

Theo Andrew

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VanEck is planning to add ESG screens on the indices tracked by its semiconductor and hydrogen ETFs due to “increased demand for ESG compliant investments”.

Following a review of its product range, the $885.8m VanEck Vectors Semiconductor UCITS ETF (SMGB) and the $78.4m VanEck Vectors Hydrogen Economy UCITS ETF (HDRO) will see their ESG methodology tightened.

Both the MVIS US Listed Semiconductor 10% Capped index and the MVIS Global Hydrogen Economy index, tracked by SMH and HDRO, respectively, will have ESG added to their name.

As a result, SMGB and HDRO will screen out companies with “severe social norms violations”, according to research by data provider ISS, and also companies with any revenue exposure to controversial weapons including anti-personnel mines, biological weapons and chemical weapons.

It will also exclude companies that exceed a “certain threshold of revenue” to sectors including tobacco, gambling, military equipment and energy extractives.

However, it added companies that are not covered by ISS may be eligible for inclusion.

VanEck said the tracking error and risk profiles of the two ETFs will remain the same while the total expense ratios (TER) will stay at 0.55% for HDRO and 0.35% for SMGB.

Commenting on SMGB’s changes, VanEck said: “The proposed amendment is being proposed as part of the company’s continuous review of its existing product range and due to increased demand for ESG compliant investments.

“The company believes that the re-named index, which consists of companies that meet certain minimum ESG standards, will increase its sustainable footprint by focusing its investment strategy on sustainable investment strategies.”

Shareholders will vote on the changes at an extraordinary general meeting on 2 March with the changes earmarked for 18 March.

It is the latest ESG index change for VanEck after it switched the index on its US equity ETF to one that tracks ESG metrics, renaming it the VanEck Vectors Morningstar US Sustainable Wide Moat UCITS ETF (MOAT).

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