• ETF Insights

    Sustainability Matters

     

    Rising trend

    Sustainable investing is on the rise amid the pandemic. Mutual funds and ETFs that invest according to ESG principles attracted net inflows of US$81bn globally between June and September this year, up 19% from the second quarter, pushing assets under management in the products to a new high of just over US$1tn, according to Morningstar1. The US accounted for 12% of the global inflows, while Europe continued to dominate the segment with approximately 77%. Flows in the rest of the world rebounded significantly over the quarter, surpassing US$9 billion for Canada, Australia and New Zealand, Japan, and Asia combined.

    Growing public awareness of the climate crisis is propelling sales of ESG funds. The disruption caused by COVID-19 has also accelerated the segment’s growth as investors look for sustainable business models that can withstand market shocks. Although investor demand for sustainable investing was on the rise before the pandemic, the crisis has thrown up further examples of corporate failure into sharper focus.

    Sustainability related considerations such as climate change can influence long-term returns because these may have a substantial impact on asset pricing and capital allocations. ESG funds’ low exposure to oil and gas have helped them stay resilient at a time when energy stocks have sold off.

    Figure 1 shows that global ESG investments, as represented by the Solactive Sustainable World Equity Index, have held up pretty well in the wake of the pandemic market volatility; it has made steady gains since bottoming in March. More recently, investors looking to capture the potential upside from a number of US President-elect Joe Biden’s policies around sustainable measures have further supported the rebound.

    Figure 1: Market performance (Total returns, rebased)

    Market performance (Total returns, rebased)

    Source: Factset. As of 10 November 2020. The chart represents past performance, which is no guarantee of future performance. Index performance is not illustrative of fund performance.

    With growing awareness comes greater access to investment solutions. One of those options investors should consider is the VanEck Vectors Sustainable World Equal Weight UCITS ETF (TSWE). It is a UCITS-compliant exchange-traded fund that gives investors exposure to a diversified portfolio of sustainable companies listed on exchanges in developed markets around the world.

    Systematic, transparent methodology

    The ETF tracks the Solactive Sustainable World Equity Index. The fund invests in the top 250 shares from global developed markets (North America, Europe and Asia) that have been screened according to sustainability criteria set by VigeoEiris. The selection model filters the shares according to a liquidity threshold (€50mn) and comprises the top ranked shares based on free-float adjusted market capitalisation.

    Thorough sustainability screening

    Global sustainable research firm VigeoEiris screens the equity universe on the 10 principles of the UN Global Compact, complemented with specific exclusions. Securities that violate the criteria are excluded from the index. The index is reviewed on sustainability criteria each quarter, during which companies that violate the criteria will be replaced.

    Equal weight index with regional caps

    The portfolio is globally equally weighted with a maximum allocation of 40% per region. This helps to diversify global exposure and prevent large concentrations in the index.

    ESG credentials

    The ETF is also rated favourably in other ESG assessments such as MSCI’s ESG ratings. It scored an “A” and moderate carbon footprint. The full information can be viewed here.

    Weighted Average Carbon Intensity

    Source: MSCI.

    Key Points:

    • COVID-19 and climate change have raised public awareness of the importance of environmental, social, and governance (ESG) factors in sustainable investing.
    • Companies that have strong governance frameworks that manage sector specific risks and companies that continue to act in the best interest of communities have held up well so far amid the unusual market conditions unleashed by the pandemic. As a result, we believe higher ESG rated companies may add resilience to a portfolio.
    • Investors seeking sustainable investments in a cost-efficient way should consider the VanEck Vectors Sustainable World Equal Weight UCITS ETF (TSWE).
    • The fund is a UCITS-compliant ETF that invests in 250 of the world’s most liquid and most highly capitalised (free float) companies, providing a global and all-encompassing sustainable equity portfolio. Importantly, it only invests in those companies that have the best ESG practices in their industries (based on the screening from the Global sustainable research firm VigeoEiris).
    • The ETF is globally equally weighted with a maximum allocation of 40% per region. Its TER of 0.30% p.a. is among one of the lowest in the asset class.

    1Source: Morningstar. As of September 2020.


    Important Disclosure

    For informational and advertising purposes only.

    This commentary originates from VanEck Investments Ltd, a UCITS Management Company under Irish law regulated by the Central Bank of Ireland and VanEck Asset Management B.V., a UCITS Management Company under Dutch law regulated by the Netherlands Authority for the Financial Markets. It is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck Investments Ltd, VanEck Asset Management B.V. and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this commentary. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the commentary’s publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.

    VanEck Asset Management B.V., the management company of VanEck Vectors Sustainable World Equal Weight UCITS ETF (the "ETF"), a sub-fund of VanEck Vectors ETFs N.V., is a UCITS management company incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). The ETF is registered with the AFM and tracks an equity index. The value of the ETF’s assets may fluctuate heavily as a result of the investment strategy. If the underlying index falls in value, the ETF will also lose value.

    Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com, from the Management Company or from the local information agent details to be found on the website.

    The VanEck Vectors Sustainable World Equal Weight UCITS ETF is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade mark or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade mark for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in VanEck Vectors Sustainable World Equal Weight UCITS ETF.

    The Dutch domiciled ETFs use a gross reinvestment index as opposed to many other ETFs and investment funds that use a net reinvestment index. Comparing with a gross reinvestment index is the purest form since it considers that Dutch investors can reclaim the dividend tax withheld. Please note that the performance includes income distributions gross of Dutch withholding tax because Dutch investors receive a refund of the 15% Dutch withholding tax levied. Different investor types and investors from other jurisdictions may not be able to achieve the same level of performance due to their tax status and local tax rules.

    All performance information is historical and is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. You must read the Prospectus and KIID before investing in a fund.

    No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

    © VanEck Investments Ltd / VanEck Asset Management B.V.

     


  • Important Disclosure

    For informational and advertising purposes only.

    This information originates from VanEck (Europe) GmbH which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin). The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.

    All performance information is historical and is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. You must read the Prospectus and KIID before investing.

    No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

    © VanEck (Europe) GmbH