One new version of the world’s largest exchange-traded fund manages holdings in compliance with environmental, social and governance standards. One feature is the lower weight of some technology Titans such as Tesla, Facebook and Amazon.
The $ 200 billion QQQETF, which tracks the Nasdaq-100 Index, is the second most actively traded exchange-traded fund. On Wednesday, fund manager Invesco released an ESG version for US and European investors based on a new format index created by Nasdaq in June.
Some of the new weights may come as a surprise, as many tech groups usually get high scores. ESG measures.. Still, Amazon, Google, Tesla, Facebook, etc. have lower ESG weight rankings than the current Nasdaq-100 weights based on market capitalization.
The new weights measure how effectively companies manage ESG risk and are based on data collected by Morningstar’s unit, Sustainalytics. “Managing risks in human capital and product governance reveals significant shortcomings,” said Sustainalytics, a pioneer in electric vehicles.
Meanwhile, Microsoft, Apple, and Nvidia technology groups will become more dominant members of the ESG version of the Nasdaq-100 Index and Invesco ETF.
“Managing ESG issues is part of the rating process,” said Lauren Dillard, Head of Investment Intelligence at Nasdaq.
The six companies that make up the Nasdaq 100 are not included in the ESG version of the index due to a methodology that excludes companies that make money from sources such as military weapons, nuclear power, oil and gas, and steaming coal.
Among the excluded companies are Exelon, American Electric Power and Xcel Energy. These are all utilities, and according to the index methodology, more than 4.9% of their annual revenue comes from nuclear or coal-fired power plants.
Removing these companies “improved an already low ESG risk assessment [of the Nasdaq-100] Invesco said.
Todd Rosenburg, Head of ETFs and Mutual Funds Research at CFRA Research, said:
Investors have been increasingly focused on ESG funds over the last two years, rewarding fund providers such as BlackRock and Invesco. According to FactSet, after a record $ 27.5 billion inflow in 2020, passively managed ETFs with major ESG mandates received $ 24 billion in the year to 22 October.
While some QQQ holders may want to own ESG-colored ETFs, Anna Paglia, Global Head of ETFs and Indexing Strategy at Invesco, said investment managers said, “A new segment of the investor group. “Attract”, he said.
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Invesco launches ESG version of $200bn exchange traded fund Source link Invesco launches ESG version of $200bn exchange traded fund