State Street Global Advisors (SSGA), the investment management arm of State Street Corporation (NYSE:STT), has launched an international equities fund which screens out companies involved in tobacco and controversial weapons.
The fund is aimed at Australian institutional investors which are increasingly integrating Environmental, Social and Governance (ESG) considerations into their investment decisions.
Medibank Private Limited, which has a policy of not investing in tobacco companies in its own $2.4 billion investment portfolio, provided $170 million of seed capital for the new fund.
The recently launched State Street International Equities Index Trust Ex Tobacco Ex Controversial Weapons is designed to track the performance of the MSCI World ex Australia ex Tobacco ex Controversial Weapons Index.
The Index excludes more than 10 companies in its parent index, the MSCI World Index, which have significant business activities involving tobacco as well as those engaged in making cluster bombs, landmines, chemical and biological weapons and depleted uranium weapons.
“For some years a number of our large Australian clients have chosen to exclude tobacco and weapons from their portfolios as part of an overall increase in interest in ethical investing,” Jonathan Shead, Head of Portfolio Strategists, Asia Pacific at SSGA, said. “However this has largely been achieved through separate, customised mandates which can be expensive for all but the largest investors.”
Estimates suggest the total size of ESG assets under management globally could be as high as US$22 trillion, concentrated largely in North America, Northern Europe and Australia.
“We’re proud to be investing in a tobacco-free portfolio,” said Medibank chief executive Craig Drummond. “This decision is just good business sense. Our mission for better health has to carry all the way through our business – from our employees and customers through to investments.
SSGA has more than 30 years of experience in ESG investing globally with approximately US$155 billion in ESG assets under management as at 30 June 2016. These strategies offer the full spectrum of solutions, from traditional screened portfolios to ESG-themed portfolios which seek alpha.
The new fund has a minimum initial investment of $25,000 and a Management Expense Ratio of 0.21%.