State Street Global Advisors (SSGA) has created, in partnership with MSCI, a low carbon, high environmental, social and governance (ESG) international equities index fund which will target Australian institutional investors.
The State Street Low Carbon ESG International Equities Index Trust would be the next phase for an index fund which was launched by SSGA 18 months earlier, and which screened out companies engaged in tobacco and controversial weapons.
The firm also said it would change the fund’s index to one, which would further reduce carbon emissions intensity by 50 per cent and would target a 20 per cent improvement in its overall ESG profile.
The fund was valued at $229 million, as at 28 February 2018, and would track the MSCI World ex Australia Select ESG Low Carbon Integrated Index.
SSGA’s head of global equity beta solutions, Asia ex Japan, Susan Darroch said the index would also allocate higher weightings to companies with better overall ESG scores and would exclude stocks that do not adhere to international norms such as the UN Declaration of Human Rights.
“While many larger institutions are of sufficient size to have customised, low carbon/ESG mandates, other institutions are looking to achieve the same exposure via a low-cost indexed fund,” Darroch said.
“Our clients want the ESG outcome, but to avoid significant deviations in country and sector allocations when compared to the broader market index.
“There are less than a handful of existing options to do this locally.”