Invesco has unveiled the first ETF in Canada to provide exposure to S&P 500 constituents while incorporating environmental, social, and governance (ESG) criteria.
The Invesco S&P 500 ESG Index ETF (ESG CN) has listed on the Toronto Stock Exchange in Canadian dollars.
It is also available in a currency-hedged share class (ESG.F CN) that mitigates the risk of adverse currency movements between the US and Canadian dollars.
The fund tracks the S&P 500 ESG Index which aims to offer an investment profile similar to that of the bellwether S&P 500 while targeting companies that are better aligned with ESG values.
The index uses data from Sustainalytics to screen out firms with significant business activities linked to the tobacco and controversial weapons industries. Companies with weak adherence to the UN Global Compact Principles are also excluded.
The remaining constituents are then assigned an ESG score based on SAM’s (formerly RobecoSAM) ‘Corporate Sustainability Assessment’. This score is either calculated directly by a company completing a comprehensive assessment (together with supporting documents), or – in the absence of this – by using publicly available information.
Those firms with the lowest ESG scores are removed, whilst aiming to maintain 75% of the float-adjusted market capitalization of each Global Industry Classification Standard (GICS) Industry Group within the S&P 500. The index is then weighted by float-adjusted market cap. Reconstitution and rebalancing occur annually in April.
According to S&P Dow Jones Indices, the methodology provides an index that is aligned with socially responsible investing values while maintaining a risk-and-return profile similar to the parent index. It targets a tracking error of less than 100 basis points relative to the parent S&P 500.
The ETF comes with a competitive management fee of just 0.15%.
Dan Draper, Managing Director, Global Head of Invesco ETFs, commented, “Invesco has been very deliberate in our expansion of the ETF business in Canada, thoughtfully launching products that we feel will further open up innovation in the space. We believe that the Invesco S&P 500 ESG Index ETF will build on that history by offering an ESG fund that utilizes the framework of the most notable measure of the US equity market.”
Jasmit Bhandal, Vice President, Head of Invesco’s ETF Product Strategy & Development in Canada, added, “The launch of the Invesco S&P 500 ESG Index ETF recognizes the demand from Canadian investors for an ETF that screens for ESG but still offers a return profile in line with the US large-cap market. We believe that S&P DJI’s method of evaluating and eliminating companies in this ESG Index could produce an ETF portfolio that overall favours companies with strong ESG scores, while still maintaining the same sector-balances and risk/return profile of its parent.”
Reid Steadman, Global Head of ESG Indices at S&P Dow Jones Indices, said, “We’re excited to partner with Invesco on the launch of the first ETF product in Canada based on the S&P 500 ESG Index. Since we introduced the world’s first global ESG Index 20 years ago, the Dow Jones Sustainability World Index, S&P Dow Jones Indices has been a pioneer providing benchmarks for investors seeking to align their investment goals with their individual values.”