Pax Plans Eco-Friendly 'Sustainability ETFs'

Includes: DSI, FAN, KLD, PBW, TAN
by: Michael Johnston

As governments around the world place a renewed emphasis on eco-friendly business practices, one ETF firm is rolling out a line of products targeting firms with positive environmental and social factors. Portsmouth, New Hampshire-based Pax World Management has filed for approval on three “sustainability ETFs” based on indexes that determine holdings based on “ESG criteria” – environmental, social, and governance factors. The proposed ETFs include:

Redwood Trees

  • ESG Shares FTSE KLD North America Sustainability Index Fund: Invests in U.S. and Canadian companies with the highest ESG factors. Market capitalizations of companies included in this index range from about $160 million to $155 billion.
  • ESG Shares FTSE KLD Europe Asia Pacific Sustainability Index Fund: Invests in the companies with the highest ESG scores from 23 developed market countries in Europe and the Asia Pacific region, including Japan, Hong Kong, France, and Germany.
  • ESG Shares FTSE Environmental Technologies (ET50) Index Fund: Tracks an index composed of the 50 largest global companies with a core business in environmental technology, including alternative energy, water treatment, pollution control, and waste management companies.

The North America fund would have an expense ratio of 0.50%, while fees for the other two ETFs would be 0.55%.

Socially-responsible ETFs aren’t new to the U.S. industry, with several funds offering exposure to firms with positive ESG factrors. The iShares KLD Select Social Index Fund (NYSEARCA:KLD) and iShares KLD 400 Social Index Fund (NYSEARCA:DSI) both invest in socially responsible companies, including big weights to Microsoft, Johnson & Johnson, IBM, and Proctor & Gamble. In aggregate, these two ETFs have about $200 million in assets

There are also several alternative energy ETFs available, including diversified funds such as the PowerShares WilderHill Clean Energy Portfolio (NYSEARCA:PBW) and more targeted ETFs like Claymore’s TAN and First Trust’s FAN.

See the filing here.

Disclosure: No positions at time of writing.