Canadian ETF issuer CI First Asset has launched its first fund aimed at environmental, social, and governance (ESG) conscious investors.
Rohit Mehta, President of CI First Asset ETFs.
The CI First Asset MSCI World ESG Impact ETF (CESG CN), which provides exposure to developed market stocks globally, has listed on NEO Exchange and comes with an expense ratio of 0.55%.
It is also available with currency hedging relative to Canadian dollars for the same fee under the ticker CESG.B CN.
CI First Asset has partnered with index provider MSCI for the launch, with the fund tracking its MSCI World ESG Select Impact ex Fossil Fuels Index.
The index screens the parent MSCI World Index, a reference for large- and mid-cap equity performance across 23 developed markets, according to several sustainability-themed criteria.
The methodology excludes companies embroiled in ESG controversies, those with notable fossil fuel reserves used for energy purposes, and those that generate less than 30% of their revenue from “Impact Sales”. Impact Sales refers to proceeds derived from MSCI’s list of social and environmental categories which includes alternative energy, energy efficiency, green buildings, sustainable water, pollution prevention, nutrition, major disease treatment, sanitation, affordable real estate, SME finance, and education.
The remaining stocks are weighted by market capitalization subject to a sector cap of 25% and an individual security cap of 5%. The index is reconstituted and rebalanced on a quarterly basis.
Rohit Mehta, President of CI First Asset ETFs, commented, “The fund represent an important addition to our product shelf as they provide a meaningful way for investors to diversify their portfolios while allocating capital towards some of today’s most pressing global issues.”
Roy Ratnavel, Head of Sales for CI Investments, added, “ESG issues are some of the most important drivers of change in the world today. Companies are increasingly rethinking the ways in which they conduct business, while investors are re-evaluating traditional investment approaches.”
Jos Schmitt, President and CEO, NEO Exchange, said, “As the first Canadian exchange to partner with the Sustainable Stock Exchanges Initiative, we acknowledged our responsibility as a stock exchange in fostering greater awareness of ESG factors across the whole investment spectrum, and understood at an early stage how important ESG investing would become in the global capital markets. Welcoming yet another industry leader with an ESG impact fund to our exchange is a testament to the benefits of and continued need for the right competition in Canadian capital markets.”
ESG in Canada
ESG investing has become a notable theme across the ETF industry worldwide over the past few years with an increasing number of issuers looking to launch sustainable products and the strategies recording significant growth in assets under management.
Canada’s largest ETF issuer BlackRock introduced a suite of low-cost ESG ETFs earlier this year that provide a range of ‘core’ equity and fixed income exposures while applying sustainability screens.
Other notable issuers to launch their first ESG ETFs recently include Horizons ETFs which unveiled the Horizons Global Sustainability Leaders Index ETF (ETHI CN) in November 2018, while Fidelity Investments Canada introduced the Fidelity Sustainable World ETF (FCSW CN) in June 2019. Both ETFs provide exposure to a portfolio of global securities selected for their robust ESG characteristics, while the Fidelity fund also incorporates a multifactor approach.
Interestingly, while BlackRock has made a decisive move into the ESG ETF market, Canada’s next two largest ETF issuers – Vanguard and BMO – have yet to release their own sustainability products.