Satrix unveils South Africa’s first socially responsible ETFs

Sep 14th, 2020 | By | Category: Equities

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Satrix Managers has launched a pair of ETF in South Africa providing broad developed and emerging market equity exposures while adhering to environmental, social, and governance (ESG) principles.

Satrix ESG ETFs South Africa

Satrix has launched the first ETFs in South Africa to abide by socially responsible investment principles.

The Satrix MSCI World ESG Enhanced ETF (STXESG SJ) and Satrix MSCI EM ESG Enhanced ETF (STXEME SJ) have listed on the Johannesburg Stock Exchange with expense ratios of 0.43% and 0.46%, respectively.

They are the first socially responsible ETFs to launch in South Africa.

Each fund is effectively structured as a feeder fund, investing its assets in European domiciled ETFs provided by BlackRock – the iShares MSCI World ESG Enhanced UCITS ETF and iShares MSCI EM ESG Enhanced UCITS ETF, each of which houses approximately $140m in assets under management.

The iShares ETFs are linked to indices from MSCI that apply the index provider’s ‘ESG Advanced Focus’ methodology to the MSCI World and MSCI Emerging Markets universes of large- and mid-cap stocks.

Each index first screens out companies involved with controversial and nuclear weapons, civilian firearms, tobacco, thermal coal, and oil sands as well as those implicated in severe ESG-related controversies and those in violation of the United Nations Global Compact principles.

The remaining constituents are weighted so as to enhance the index’s sustainability exposure by tilting towards firms with robust ESG ratings as determined by MSCI ESG Research. The rating – one of seven grades from ‘AAA’ to ‘CCC’ – indicates how well each firm manages key ESG issues relative to industry peers.

The weighting of constituents is undertaken using an optimization process that aims to maximize exposure to the ESG factor while maintaining sector diversification and controlling tracking error relative to the parent universe. Additionally, the optimization process aims to reduce the carbon intensity score of the index by 30%.

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