Legal & General Investment Management has teamed up with index boutique Foxberry on a second responsible investment ETF.
L&G has rolled out a second ‘Responsible Exclusions’ ETF in partnership with Foxberry, this time tracking US equities.
Listed on the London Stock Exchange, the L&G US Equity (Responsible Exclusions) UCITS ETF provides exposure to US equities whilst taking into account environmental, social and governance (ESG) factors.
The fund is linked to the Foxberry Sustainability Consensus US Total Return Index and has launched with $550m in assets from Varma, a leading Finnish pension fund.
Index constituents are determined by a committee of sustainability experts drawn from major asset owners (including L&G and Varma) with constituents weighted according to free-float market capitalization, subject to a maximum weight per stock at the point of rebalance of 20%.
The committee follows a series of exclusion guidelines and other specifications but may exercise discretion in its determinations. It may also change the requirements of such guidelines to evolve with changing conditions and view of impact investing.
The exclusion guidelines, which are applied to a universe that broadly corresponds to the largest 500 companies listed in the US, consider environmental, governance, sustainability, equality, and ethical concerns as well as adherence to UN sustainable development goals and business-practice norms.
Stocks are automatically excluded if they operate in the tobacco or controversial weapons industries or have exposure to coal (25%+ of revenues) or other stranded assets (e.g. hydrocarbon resources). The ten companies with the highest CO2 emission intensity are also excluded.
Proponents of a committee-based approach contend that indices (and thus portfolios linked to them) can react more quickly to market developments and evolving sustainability considerations than rules-based indices, and, similarly, can arrive at a consensus position on matters of responsible investment or make judgement calls or take active decisions in areas where ESG data is sporadic, erratic, spurious and/or limited in quality or scope.
Howie Li, Head of ETFs at Legal & General Investment Management, said, “LGIM is excited to be expanding the Responsible Exclusions fund range by offering investors access to both European and US exposures. Investing sustainably is the heart of our investment philosophy and, together with Foxberry, we are proud of the shared commitment we have with our investors in this range. We believe that the joint expertise of dedicated experts will provide more investors with the ability to invest dynamically and transparently as the responsible investment landscape evolves.”
Henrik Brunlid, CEO at Foxberry, added, “Expanding the Sustainability Consensus offering into the US markets is a natural progression, as we continue the build-out of our sustainability analytics platform and index offering.”
The ETF has a total expense ratio of 0.12% and trades in pound sterling (RIUG LN) and US dollars (RIUS LN). It is physically backed.
The launch complements the L&G Europe Equity (Responsible Exclusions) UCITS ETF, which debuted in September and is linked to the Foxberry Sustainability Consensus Europe Total Return Index.