The ETF industry has lately been growing by leaps and bounds, with a smarter approach and new concepts. Amid the whole bunch of newer themes, socially relevant funds are in vogue. Companies that focus heavily on environmental, social and governance (ESG) practices are being desired by investors, if we go by BlackRock.
As per the latest data by Morningstar, 70% of all investors are interested in socially responsible investing, while more than 80% of millennials seek to go socially responsible on their investment decisions. No wonder, issuers are highly receptive to the idea and rolling out products specifically targeting the ESG criteria.
Sarah Lee Kjellberg, director and head of US iShares sustainable ETFs said no new ESG ETFs were brought about in 2010, 2011, and 2013. “But in 2016, 22 ESG ETFs were launched, and new net inflows into the space more than tripled. Another 18 launches followed in 2017, coinciding with a 39% year-over-year rise in net inflows to reach more than US$1.6 billion.”
Though the space is yet to make a killing and gain considerable momentum, investors’ interests are definitely on the rise. So why not look at regular ETFs that do not carry an ESG tag but have social conscience.
Below we cherry-picked five Europe ETFs that have a top-notch MSCI ESG Quality Score, as indicated by etf.com. Scores are shown on a scale of 10. Higher the score, the more socially responsible the fund is.
Also, economic activity in Europe has been pretty high lately. The European Union economy expanded at its quickest clip (2.5%) in a decade in 2017, as per figures from the EU statistics office Eurostat.
Let’s take a look at the funds:
First Trust Stoxx European Select Dividend Index Fund (NYSEARCA:FDD) – Score – 7.71
The underlying index comprises 30 high dividend-yielding securities selected from the STOXX Europe 600 Index. The fund has a tilt toward Financials (36.27%) while Energy (12.71%), Real Estate (11.67%) and Utilities (11.41%) take the next three spots. France (21.05%), United Kingdom (19.17%), Switzerland (15.39%) and Italy (12.73%) are the top four countries of the fund.
Global X MSCI Portugal ETF (NYSEARCA:PGAL) – Score – 7.70
The fund offers exposure to Portuguese equities. Utilities (30.4%), Energy (21.7%) and Materials (14.3%) are the top three sectors of the fund.
iShares MSCI Sweden ETF (NYSEARCA:EWD) – Score – 7.57
The fund offers exposure to Swedish stocks and is heavy on two sectors – Industrials (34.6%), and Financials (31.5%).
SPDR Euro STOXX 50 ETF (NYSEARCA:FEZ) – Score – 7.50
The underlying EURO STOXX 50 index looks to represent the performance of some of the largest companies across components of the 19 EURO STOXX Super-sector Indexes. Financials (23.3%), Industrials (14.1%) and Consumer Discretionary (11.94%) are the top four sectors of the fund. As far as geographic exposure is concerned, the fund has a tilt toward France (37.1%) and Germany (32.7%).
O’Shares FTSE Europe Quality Dividend (NYSEARCA:OEUR) – Score 7.40
The underlying FTSE Developed Europe Qual/Vol/Yield Factor 5% Capped index offers exposure to the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in Europe. Health Care (18.7%), Consumer Goods (18.2%), Industrials (17%) and Financials (13.9%) are the top four sectors of the fund. United Kingdom (28.6%), Switzerland (19%), France (16.0%) and Germany (11.2%) are its top four countries.
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