Sweden-based AuAg Funds, an investment boutique focused on precious metals and clean energy, has launched Europe’s first ESG-focused gold mining ETF.

Eric Strand, CEO at AuAg Funds.

The AuAg ESG Gold Mining UCITS ETF is listed on London Stock Exchange in US dollars (ESGO LN) and pound sterling (ESGP LN), and on Xetra in euros (ZSGO GY).

The fund has been brought to market in partnership with London-based white-label ETF issuer HANetf.

According to AuAg Funds, impact investing within the gold mining industry promotes environmentally friendly miners to be on the grid, build solar farms on-site, use fuel-cell mining trucks, and restore sites post-project, leaving reusable infrastructure such as roads, water, and electricity for other projects. Miners’ role in greenhouse gas emissions is further incentive to monitor ESG criteria within the sector.

Eric Strand, CEO at AuAg Funds, said: “We’re delighted to launch the AuAg ESG Gold Mining UCITS ETF which allows investment in the companies that extract precious metals, with an active ESG approach. Mining is an industry that has seen vast improvements in all aspects of ESG, but standards vary across regions and companies. ESGO helps investors get exposure towards gold mining companies with the best ESG credentials and invest in the sector more responsibly.”

Hector McNeil, co-Founder and co-CEO at HANetf, added: “ESG is very important for all types of investments and investors increasingly demand greater clarity and transparency from investment providers. It is a major focus at HANetf which partly explains why we are delighted to be able to launch the AuAg ESG Gold Mining UCITS ETF with AuAg Funds. There is also a strong investment story to tell when investing in ESG friendly gold miners which is a growth sector partly due to monetary inflation and the green transformation.”

Methodology

The fund is linked to the Solactive AuAg Gold Mining Index which chooses its constituents from a universe of stocks with market capitalizations above $500 million and average daily trading volumes greater than $5m. Eligible constituents must be classified within the gold mining or silver ore mining industries according to Factset’s Revere Business Industry Classification System (RBICS).

The index harnesses ESG data from Sustainalytics to first remove companies that are known violators of the UN Global Compact and to then rank the remaining constituents according to an ESG Risk rating.

The ESG Risk rating reflects an organization’s unmanaged ESG risk and is composed of three components: corporate governance, financially material ESG issues (factors that could reasonably impact a company’s economic value), and idiosyncratic issues (black swan risks that could be detrimental to economic value).

The 25 firms with the most favourable (i.e. lowest risk) ESG Risk ratings are selected for inclusion in the index, which is then equally weighted in order to avoid concentration in larger gold mining companies. Rebalancing occurs on a quarterly basis.

As of 14 July, Canadian miners accounted for approximately half of the total index weight with South African firms making up a fifth. The next-largest country exposures were Australia and the US, each accounting for roughly 8% of the index weight.

The portfolio includes many names familiar to investors in regular gold mining ETFs (Newmont, Newcrest, Wheaton, AngloGold Ashanti etc), but there are some notable absentees, such as industry giants Barrick Gold and Kirkland Gold, which presumably fall outside the top 25 as rated by ESG. There are also some noteworthy inclusions for what is explicitly labeled a gold mining fund, such as Fresnillo and Fortuna Silver Mines, two miners principally targeting silver, and Impala Platinum (Implats), a specialist PGM miner.

The ETF comes with an expense ratio of 0.60% and is classified as Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR).