State Street Global Advisors (SSGA) has unveiled a new suite of income-focused ETFs in Europe that seek to combine sustainable dividends with socially responsible exclusion criteria.

State Street has introduced ESG versions of its popular ‘Dividend Aristocrats’ ETFs.

The SPDR S&P Dividend Aristocrats ESG ETFs have listed on Xetra, LSE, and Euronext Amsterdam, with funds targeting global developed, US, and eurozone equity markets.

Each ETF is linked to an index from S&P Dow Jones Indices that deploys the firm’s ‘Dividend Aristocrats’ strategy of identifying companies that have maintained or increased their dividend payments for a specified number of years.

The investment thesis behind the strategy is that these companies provide a reliable source of sustainable income while also being likely to exhibit favourable fundamental characteristics including consistent operating earnings, steady cash flow growth, and corporate discipline in volatile, low-growth markets.

SSGA already offers several Dividend Aristocrats ETFs in Europe which collectively house around $6.5 billion in assets across global, US, eurozone, UK, and Asia Pacific funds.

The three new ETFs will follow the same fundamental strategies as their original editions; however, firms must also satisfy certain environmental, social, and governance (ESG) criteria to be eligible for selection. Specifically, companies that are proven violators of UN Global Compact principles, or are embroiled in severe ESG-related controversies or involved in controversial weapons, thermal coal, or tobacco are not eligible for inclusion.

Potential constituents are also assigned ESG scores based on SAM’s ‘Corporate Sustainability Assessment’. This score is either calculated directly by a company completing a comprehensive assessment (together with supporting documents), or – in the absence of this – by using publicly available information. Companies with ESG scores that sit in the lowest 25% of their universe are also not eligible for inclusion.

Each index weights its constituents by dividend yield in a bid to enhance income potential.

The ETFs

The SPDR S&P Global Dividend Aristocrats ESG UCITS ETF (ZPD3 GY / GEDV LN / GEDV NA) tracks the S&P Global ESG Dividend Aristocrats Quality Income Index which consists of the 100 highest-yielding companies globally that have market capitalizations above $1bn and have maintained or increased their dividend payments for at least ten consecutive years. Firms must also have positive cash flow and earnings over the past year to be eligible for inclusion. The weight of any single stock or GICS sector is capped at 3% and 25% respectively. The fund has an expense ratio of 0.45%.

The SPDR S&P US Dividend Aristocrats ESG UCITS ETF (ZPD6 GY/ UGDV LN / UEDV LN / UEDV NA) tracks the S&P ESG High Yield Dividend Aristocrats Index which consists of all companies from the S&P Composite 1500 – a reference for large, mid, and small-cap US equities – that have consistently increased their dividends every year for at least 20 years. A single stock cap of 4% is applied at every rebalance. It has an expense ratio of 0.35%.

The SPDR S&P Euro Dividend Aristocrats ESG UCITS ETF (ZPD9 GY / EEDV NA) tracks the S&P Euro ESG High Yield Dividend Aristocrats Index which consists of the 40 highest-yielding eurozone companies that have market capitalizations above $1bn and have maintained or increased their dividend payments for at least ten consecutive years. The weight of any single stock is capped at 5%, while country and sector weights are capped at 30%. It has an expense ratio of 0.30%.