Vanguard files for two new ESG index ETFs


#1

No endorsement, just an info:

Vanguard ESG U.S. Stock ETF and Vanguard ESG International Stock ETF are expected to be available in September 2018 with estimated expense ratios of 0.12% and 0.15%, respectively.

https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/article/IWE_NewsNewIndexETFs


#2

Interesting find. This is absolutely something I could theoretically get behind, from a moral stand point. What is everyone’s thoughts on these kinds of funds? I think in the past the argument was that they were (a) too expensive and (b) the underlying index was not really well put together in terms of what is ethical, environmental etc…

I know for example VIAC offers “sustainable funds”. Their biggest exclusion in this fund includes Apple, Facebook, Amazon, JP Morgan, BRK.

Why are these excluded? They aren’t really well known arms dealers if you ask me…
So the viac sustainable funds are not really something I am interested in.


#3

Viac “Sustainable” strategy seems to follow MSCI SRI indexes

https://www.msci.com/documents/10199/641712d5-6435-4b2d-9abb-84a53f6c00e4
Performance is close enough to normal MSCI World, so apparently there is not much added cost of being socially responsible.

Drawbacks:

  • only 408 constituents vs 1611,
  • Microsoft makes for a whopping 7.08% of the MSCI World SRI index

Exclusion of FANGs can be even seen as an advantage as they appear to be in a bubble. I guess you could say their valuation is not sustainable :).


#4

my thought is that the norm about what “sustainable” or “ethical” excludes still has to be found. for example those vanguard funds exclude companies that do nuclear energy which i believe (i studied it at ETH…) saves the world a huge portion of climate warming at the expense of a ridicolously small ecological footprint, compared to any carbon-based technology and even most renewables.
therefore i am very reserved for the moment. but that might change.


#5

Their biggest exclusion in this fund includes Apple, Facebook, Amazon, JP Morgan, BRK.
Why are these excluded?

G means Governance … in the case of Brk, for example, the independence of the board of directors vis-a-vis Buffet has been questionned, as he has longtime friendly relationships with them. For Buffet on the other hand, true independence means that directors have to be huge shareholders and are just being paid a symbolic amount (so as not becoming dependent on this income).

What is everyone’s thoughts on these kinds of funds?

I doubt that companies feel for what reasons investors buy shares. The decisions of consumers have a much stronger impact. The primary beneficaries of ESG funds are financial institutions - due to the notably higher fees - which does not really advance the purpose behind the action.