Washington state-based investment manager Saturna Capital is preparing to make its European ETF debut later this month with the launch of an actively managed sustainable global equity fund that incorporates carbon offsetting.
Jane Carten, CEO of Saturna Capital.
The Saturna Sustainable ESG Equity HANzero UCITS ETF will list on London Stock Exchange in July where it will trade in US dollars (SESG LN) and pound sterling (SESP LN).
The fund is coming to market in collaboration with London-based white-label issuer, HANetf.
The ETF will follow the same investment strategy as Saturna’s US-based mutual fund, the Saturna Sustainable Equity Fund, which launched in 2015 and is run by seasoned portfolio managers Jane Carten and Scott Klimo.
The strategy seeks long-term capital growth by investing in large and mid-cap stocks worldwide that are well-established, consistently profitable, financially strong and have robust ESG policies in place.
Issuers engaged in higher ESG risk businesses such as alcohol, tobacco, pornography, weapons, gambling, and fossil fuel extraction will not be eligible for selection. Saturna also utilizes a positive screen for ESG factors to identify companies demonstrating excellent corporate governance, positive social characteristics, and a commitment to reducing negative environmental impact.
The fund will hold approximately 50 to 60 stocks and will follow a value investment style while diversifying across industries, companies, and countries. In selecting individual securities, the managers prefer seasoned companies that are expected to grow revenue and earnings as well as firms with low price/earnings multiples, strong balance sheets, and higher dividend yields. Up to 30% of the ETF’s assets may be invested in emerging markets.
Jane Carten, CEO of Saturna Capital, said: “Saturna Capital has managed socially responsible investments via its US-based family of Shariah-compliant funds since the firm’s founding in 1989. Over 30 years of experience in socially responsible investing led us to launch the Saturna Sustainable Funds in 2015 with a specific commitment to ESG investing, and we are delighted to bring the Saturna Sustainable ESG Equity HANzero UCITS ETF as an active ETF to Europe.
“Saturna Capital believes that companies proactively managing business risks relating to ESG issues make better contributions to the global economy and are more resilient. Saturna has a proprietary ESG scoring model which uses a combination of negative and positive screening, along with financial analysis and an emphasis on low debt, to outperform peers on a variety of ESG factors. We believe these companies are more resilient and make better contributions to portfolios designed for patient investors.”
As of 30 June, the US-based Saturna Sustainable Equity Fund has delivered a return of 15.57% per annum over the past five years, slightly higher than the benchmark S&P Global 1200 which returned 15.39%.
In addition to the ETF’s sustainable investment strategy, the fund will also offset an amount of carbon equivalent to the total emissions of the companies in the portfolio prorated to the value of the investment.
The carbon emissions apportioned to the fund’s holdings will be offset to zero through investments in carbon-reduction projects selected by offset specialists, South Pole. A carbon offset project reduces emissions of carbon dioxide or other greenhouse gases made to compensate for emissions produced elsewhere.
The projects supported by the fund include the Topaiyo Forest Conservation in Papua New Guinea and the Musi River Hydro Plant in Sumatra, Indonesia.
Due to the ETF’s sustainability credentials, it will be classified as Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR).
It will come with an expense ratio of 0.75%.
The fund will be the second ETF in Europe to incorporate carbon offsetting following last month’s introduction of the HANetf S&P Global Clean Energy Select HANzero UCITS ETF (ZERO LN). This fund, which was launched through a partnership between Toronto-based Purpose Investments and HANetf, provides exposure to clean energy companies globally by tracking the S&P Global Clean Energy Select Index.