Nuveen, a division of investment giant TIAA Global Asset Management, has launched a suite of NuShares exchange-traded funds on Bats Exchange tracking indices employing environmental, social and governance (ESG) screening criteria. The ETFs draw upon the long-standing ESG expertise of TIAA.
The five NuShares ESG ETFs invest in US equities across various market capitalizations and investment styles while giving consideration to certain ESG criteria.
Martin Kremenstein, Managing Director and Head of Exchange-Traded Funds at Nuveen, commented: “This latest offering highlights the many areas of strength across our firm as we are able to leverage the widely respected ESG expertise of TIAA with the product development and service platform of Nuveen.”
The indices are owned, calculated and controlled by MSCI, but utilise the TIAA name, reflecting the asset management giant’s input into the index construction process.
The indices exclude companies involved in controversial businesses, including alcohol, tobacco, military weapons, firearms, nuclear power and gambling, among others. ESG performance is then evaluated using assessment categories relevant to the firm’s sector.
Environmental assessment categories may include climate change impact, natural resource use, waste management, and emission management. Its social evaluation categories may include employee and supplier relations, product safety, and sourcing practices. Governance assessment categories may include corporate governance practices and business ethics.
The five ETFs invest in US equities across various market capitalizations and investment styles while giving consideration to certain ESG criteria.
ESG investing has been a bright spot for the asset management industry, representing a significant growth opportunity as investors increasingly seek to align their investments with their values.
In a recent TIAA Global Asset Management survey of over 1,000 high net worth US investors, nearly three quarters of respondents said they would be more likely to work with advisors who were able to offer them competitive investment options that also have a positive impact on society.
From a financial point of view, long-term portfolio risk/return characteristics may be enhanced through integrating an ESG framework to investment decisions. This occurs, in part, through a reduction in litigation and reputational risk. Quantitative analysis of various ESG-focused indices has thus far shown that alpha is repeatedly captured in these indices compared to broad equity benchmarks.
“Investors are beginning to realize that it is indeed possible to build a well-diversified portfolio of ESG options that can deliver competitive returns,” said Amy O’Brien, Managing Director and Head of Responsible Investment at TIAA Global Asset Management. “We expect interest in ESG investing to continue to grow in 2017, and we intend to continue to leverage the knowledge we’ve acquired during our decades of experience in socially responsible investing in order to become an indispensable ESG resource for investors and their advisors.”
The ETFs, total expense ratios (TERs) and underlying indices are as follows:
NuShares ESG Large-Cap Value ETF (Bats: NULV) TER – 0.35%
TIAA ESG USA Large-Cap Value Index
NuShares ESG Large-Cap Growth ETF (Bats: NULG) TER – 0.35%
TIAA ESG USA Large-Cap Growth Index
NuShares ESG Mid-Cap Value ETF (Bats: NUMV) TER – 0.40%
TIAA ESG USA Mid-Cap Value Index
NuShares ESG Mid-Cap Growth ETF (Bats: NUMG) TER – 0.40%
TIAA ESG USA Mid-Cap Growth Index
NuShares ESG Small-Cap ETF (Bats: NUSC) TER – 0.40%
TIAA ESG USA Small-Cap Index