Satrix MSCI World ESG Enhanced Feeder ETF
Environmental, social and governance (ESG) investing is often used interchangeably with the term sustainable investing. BlackRock defines sustainable investing as being the practice of analysing a company’s environmental, social and governance risks, as well as assessing its opportunities and progress, using ESG data and fundamental insights, to inform the allocation of capital.
The asset management company notes that there has been paradigm shift of capital towards sustainable investing with investors moving their money into sustainable investments at six times the growth rate of traditional funds.
The fund includes securities of companies with the highest ESG ratings representing 50% of the market capitalisation in each sector of the MSCI ACWI Index. In addition, companies showing qualifying involvement in alcohol, gambling, tobacco, nuclear power, civilian firearms, fossil fuels extraction, thermal coal power and weapons are excluded. The fund’s investment strategy limits the types and number of investment opportunities available to the fund and, as a result, the ETF may underperform other funds that do not have an ESG focus, thus investors should be wary of missing out on other companies that do not form part of the index.
Morningstar estimates that there is $4tn of global assets across all ESG categories and believes the growth will accelerate through 2022 and beyond. However, there is cause for concern as governments and regulatory bodies regulate the market, which might hinder the growth of the industry.
The investment objective of the ETF is to provide investors with a total return, taking into account both capital and income returns, which reflects the return of the MSCI World ESG Enhanced Focus CTB Index. The fund has a total expense ratio of 0.34% and a low tracking error of 0.09%.
Fund suitability
- This ETF is designed for investors looking to screen out controversial business areas while maintaining a risk profile similar to traditional benchmarks. Investors should therefore make a personal ethical assessment of the fund’s ESG screening prior to investing.
Fees
- The fund has a total expense ratio of 0.34%.
Top holdings
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The fund is based on the MSCI World Index, which includes large and mid-cap stocks globally.
Analysis of the fund’s strategy
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The ETF provides an opportunity for investors to invest in companies that align to their values.
Satrix MSCI World ESG Enhanced Feeder ETF (JSE:STXESG)
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Background: Exchange-traded funds (ETFs)
Exchange-traded funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to numerous companies in a single transaction. ETFs can be traded through your broker in the same way as shares, say, on the EasyEquities platform. In addition, they qualify for the tax-free savings account, where both capital and income gains accumulate tax free.
Benefits of ETFs
- Gain instant exposure to various underlying shares or bonds in one transaction
- They diversify risk because a single ETF holds various shares
- They are cost-effective
- They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
- High transparency through daily published index constituents
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