ESG ETFs and market cap

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Topic Author
byline0802
Posts: 12
Joined: Mon Oct 20, 2008 7:44 pm

ESG ETFs and market cap

Post by byline0802 » Sun Jun 28, 2020 9:46 am

Hi - I'm considering giving an ESG focus to my portfolio, which now consists mainly of VT. For this, what proportions of the funds below would approximate a total market cap weighting? Appreciate any guidance on this. Thanks in advance.

iShares ESG MSCI USA ETF (ESGU)
iShares ESG MSCI USA SmallCap ETF (ESML)
iShares ESG MSCI EAFE ETF (ESGD)
iShares ESG MSCI Emerging Markets ETF (ESGE)

retired@50
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Location: Living in the U.S.A.

Re: ESG ETFs and market cap

Post by retired@50 » Sun Jun 28, 2020 10:00 am

byline0802 wrote:
Sun Jun 28, 2020 9:46 am
Hi - I'm considering giving an ESG focus to my portfolio, which now consists mainly of VT. For this, what proportions of the funds below would approximate a total market cap weighting? Appreciate any guidance on this. Thanks in advance.

iShares ESG MSCI USA ETF (ESGU) <-- 46%
iShares ESG MSCI USA SmallCap ETF (ESML) <-- 12%
iShares ESG MSCI EAFE ETF (ESGD) <-- 32%
iShares ESG MSCI Emerging Markets ETF (ESGE) <-- 10%
Assuming you want to hold similar weighting to VT you could use the numbers I've added above.

Regards,
This is one person's opinion. Nothing more.

Topic Author
byline0802
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Joined: Mon Oct 20, 2008 7:44 pm

Re: ESG ETFs and market cap

Post by byline0802 » Sun Jun 28, 2020 10:05 am

Thanks retired@50! Also, how do you arrive at those percentages? So if I would do this that I could keep it balanced going forward.

retired@50
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Re: ESG ETFs and market cap

Post by retired@50 » Sun Jun 28, 2020 10:12 am

byline0802 wrote:
Sun Jun 28, 2020 10:05 am
Thanks retired@50! Also, how do you arrive at those percentages? So if I would do this that I could keep it balanced going forward.
Start here: https://investor.vanguard.com/etf/profile/portfolio/vt

Then, use a bit of math and some rounding for convenience.

The US market is generally approximated as 80% large cap, 20% small cap

The non-US market is approximated as 75% developed markets, 25% emerging markets.

Regards,
This is one person's opinion. Nothing more.

Topic Author
byline0802
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Re: ESG ETFs and market cap

Post by byline0802 » Sun Jun 28, 2020 10:41 am

Thank you again retired@50!

Valuethinker
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Re: ESG ETFs and market cap

Post by Valuethinker » Sun Jun 28, 2020 12:00 pm

byline0802 wrote:
Sun Jun 28, 2020 9:46 am
Hi - I'm considering giving an ESG focus to my portfolio, which now consists mainly of VT. For this, what proportions of the funds below would approximate a total market cap weighting? Appreciate any guidance on this. Thanks in advance.

iShares ESG MSCI USA ETF (ESGU)
iShares ESG MSCI USA SmallCap ETF (ESML)
iShares ESG MSCI EAFE ETF (ESGD)
iShares ESG MSCI Emerging Markets ETF (ESGE)
Some research & you might find that ESG funds don't do what you think they do. You find companies like Royal Dutch Shell which score highly on corporate Governance, despite the environmental issues and despite the Nigerian Delta. At least I did with UK tracking indices & funds.

There's some sense that high ESG correlates with "quality" stocks and possibly with "low volatility" stocks. Companies are good because they operate in markets and products where that's a competitive advantage/ not a disadvantage rather than out of a positive choice.

Amazon is a great sustainability business model - unless you dislike plastic packaging or perhaps work in their warehouses?

If I really wanted to go ESG in my portfolio (I take a global indexing view - UK based) and I was American, I'd probably do something like 90% Total World Market (in some fund) + 10% something like Calvert Funds i.e. funds that actively lobby companies for better governance, environmental standards etc.

In other words in the Exit, Voice & Loyalty hierarchy

https://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty

I don't believe Exit does much good as a shareholder. It's Voice that counts - activist lobbying.

I should stress I have only seen ads for Calvert Funds in The Atlantic magazine - I've never looked into what they actually *do*.

Topic Author
byline0802
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Re: ESG ETFs and market cap

Post by byline0802 » Sun Jun 28, 2020 12:57 pm

Thanks, Valuethinker - Really appreciate the reference to Exit, Voice and Loyalty.

Part of my wanting to invest in ESG funds is that collectively this will help motivate asset managers - both active and passive - to bring more voice and higher demands to companies about ESG issues, especially E, knowing that this is of importance to more of their AUM.

The US offerings of positive-focused passive ESG funds is rather limited at the moment. Hopefully this increases soon!

Alan S.
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Re: ESG ETFs and market cap

Post by Alan S. » Mon Jun 29, 2020 10:49 am

Those interested in ESG offerings should be interested in newly proposed DOL Regs with respect to the long standing trade off between fund performance and ESG goals. Basically, ESG offerings should not be provided if analysis concludes that fund performance is compromised. This should provide some comfort to those concerned about sacrificing performance for ESG goals. If an ESG fund is offered in a plan, fund performance is not expected to suffer.

This link explains prior DOL Rules with respect to new proposed rules on this subject:
https://www.ballardspahr.com/alertspubl ... ment-plans

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librarianaire
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Re: ESG ETFs and market cap

Post by librarianaire » Tue Jun 30, 2020 8:09 am

I’ve been following SRI/ESG for decades, and I’ve always kept a large portion of my core holdings in these funds (mostly via TIAA). I’ve never been more optimistic about ESG funds’ prospects, thanks in large part to BlackRock; their processes and pricing are exemplary:

https://www.ishares.com/us/strategies/s ... -investing

The number of low cost ESG funds makes it possible to replicate most of the more influential lazy portfolios while keeping fees very, very low:

https://www.bogleheads.org/wiki/Lazy_portfolios

My preference is for David Swensen’s. Morningstar recently posted a summary of the lower cost ESG funds, which included a few I hadn’t yet seen, most notably IQ Candriam’s two ESG funds:

https://www.morningstar.com/articles/98 ... -esg-funds
“Our own experience provides the basic material for our imagination, whose range is therefore limited.” Thomas Nagel, What is it like to be a bat?

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