Nuveen has expanded its range of environmental, social, and governance (ESG) ETFs with the launch of the Nuveen ESG Large-Cap ETF (NULC US).
Jordan Farris, Head of ETF Product Development at Nuveen.
Listed on Cboe BZX, the fund targets the US large-cap equity market.
“The addition of a large-cap strategy to our ESG ETF suite provides a great opportunity for investors to build a broadly diversified ETF portfolio integrating responsible investing principles,” said Jordan Farris, Head of ETF Product Development at Nuveen.
“We firmly believe that the benefits of risk mitigation inherent in a responsible investment approach offer the potential for having a positive long-term impact on investment performance.”
The ETF is linked to the TIAA ESG USA Large Cap Index (Nuveen is an operating division of TIAA Global Asset Management) which is owned, calculated, and controlled by MSCI. The index selects its constituents from the MSCI USA Index, representing approximately the top 85% of the market capitalization of the US equity market.
The index screens out companies with business operations in alcohol, tobacco, military weapons, firearms, nuclear power, and gambling. Firms embroiled in current ESG business controversies as well as companies that exceed certain carbon emission thresholds are also excluded.
Each company’s ESG performance is then evaluated using assessment categories relevant to the firm’s sector. Environmental assessment categories may include climate change impact, natural resource use, waste management, and emission management, social evaluation categories may include employee and supplier relations, product safety, and sourcing practices, and governance assessment categories may include corporate governance practices and business ethics.
Firms with the lowest ESG scores (‘CCC’ ratings, according to MSCI ESG Research) are excluded. The methodology then selects firms with the highest ESG ratings such that the index contains 50% of the sector market capitalization of the parent universe. This approach helps reduce the tracking error of the index relative to the MSCI USA Index.
The fund comes with an expense ratio of 0.20% which is relatively cheap amongst other responsible investment ETFs, although investors can get ESG-screened US equity exposure for as low as 0.12% through the Vanguard ESG US Stock ETF (ESGV US). This fund tracks the FTSE US All Cap Choice Index and has around $400 million AUM.
Nuveen offers a further seven ESG equity ETFs including US large- and mid-cap funds that target growth and value factor premia. The other three ETFs offer exposure to US small-cap, international developed, and emerging market stocks.
Growing demand for ESG
Investor interest in ESG strategies continues to grow, especially amongst millennial investors. According to Nuveen’s latest annual investor survey, 93% of millennials and 78% of non-millennials are expressing interest in adopting a responsible investment approach.
Findings from the survey also indicate that investment performance and risk management were the driving factors among high net worth investors choosing responsible investing as an approach.
Amy O’Brien, Global Head of Responsible Investing at Nuveen, commented, “Nuveen’s latest responsible investing survey results demonstrate the continued need for investment options that put responsible investing principles at the forefront. The launch of this newest ETF offers a competitive and innovative ESG large-cap solution to our clients.”