Hartford Funds has launched its first ETF with a direct socially responsible investment mandate.
Vernon Meyer, Chief Investment Officer at Hartford Funds.
The Hartford Schroders ESG US Equity ETF (HEET US) has been listed on Cboe BZX Exchange and comes with an expense ratio of 0.39%.
The actively managed fund is sub-advised by the North American division of London-headquartered asset manager Schroders with Ashley Lester, Head of Systematic Investments, serving as the portfolio manager.
The fund seeks long-term capital appreciation by investing in a multi-factor portfolio of US equities that meet Schroders’ internally developed environmental, social, and governance (ESG) criteria.
The fund may invest in companies of any size, although it is expected to maintain a significant large-cap leaning.
Firms with operations linked to tobacco, weapons, tar sands, thermal coal and gambling are removed from the eligible universe. Schroders then uses quantitative measures to select companies with a favourable mix of ESG, value, profitability, momentum, and low volatility factor exposures.
The portfolio is constructed using an optimization process that considers transaction costs and liquidity as well as diversification across factors, stocks, and sectors.
The fund seeks to outperform the Russell 1000 Index while also achieving at least a 50% reduction in carbon footprint, measured by carbon emissions per unit of revenue, relative to this benchmark.
Vernon Meyer, Chief Investment Officer at Hartford Funds, said: “The Hartford Schroders ESG US Equity ETF enables us to offer a flexible, cost-effective strategy that is designed to help investors achieve their long-term investment goals while also having a positive influence on our world. We believe that applying ESG principles to an ETF, and leveraging Schroders’ quantitative investing expertise and proprietary approach to ESG investing, can provide stronger returns and make for a better investor experience on multiple levels.”
The fund enters a niche area of the market with just three other ETFs offering actively managed ESG-conscious exposure to US large-cap equities – collectively, these funds house just $50 million in assets.
Passively managed, socially responsible US equity ETFs have flourished, however, with the segment boasting dozens of products including low-cost blockbuster funds. These include the $4.9 billion Vanguard ESG US Stock ETF (ESGV US), which comes with an expense ratio of 0.12%, as well as the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG US) and iShares ESG MSCI USA Leaders ETF (SUSL US), both of which house $3.8bn in assets and cost 0.10%.