ETF provider VanEck is aiming for a best of breed approach to ethical investing, with a new listed fund.
The VanEck Vectors MSCI International Sustainable Equity ETF will provide investors with exposure to a diversified portfolio of international companies meeting sustainability criteria.
The ETF will track the MSCI World ex-Australia ex-Fossil Fuel Select SRI and Low Carbon Capped Index, which screens companies based on fossil fuel reserves, socially responsible activities, ESG performance and carbon emissions.
The fund employs a passive management strategy of investing directly in the securities that make up the index.
The index was developed by MSCI in partnership with VanEck. It follows a multi-step process.
Arian Neiron, VanEck managing director and head of Asia Pacific, says the fund incorporates values-based and impact investing.
The index excludes companies that own fossil fuel reserves for energy purposes. Companies that hold proved and provable coal reserves and/or oil and natural gas reserves used for energy purposes are excluded.
Among the eligible securities remaining, companies are screened to exclude those whose business activities include alcohol, gambling, tobacco, military weapons, civilian firearms, nuclear power, adult entertainment and genetically modified organisms.
The remaining companies from step 2 are ranked by carbon emission intensity, with the worst 20 per cent excluded from the index.
The index then targets high ESG performers.
The fund will be listed on the Australian Securities Exchange around mid-March. It has a management fee of 0.55 per cent. Dividends will be paid annually and the fund has a dividend reinvestment plan.
A market maker is engaged to facilitate liquidity for trading in ETF units. The presence of a market maker means trading prices should be close to the net asset value.
VanEck is a privately owned global asset management company started in 1955. It launched its first ETF in the US in 2006 and today has $44 billion of ETF assets under management. It has 14 ETFs on the ASX, with assets of $1.5 billion.
The company is a signatory to the United Nations Principles for Responsible Investment.