Columbia Threadneedle Investments has expanded its suite of exchange traded funds to include three smart-beta, index-based options that target global companies that adhere to socially responsible practices with the financial stability to support and grow future dividends.
The three new ETFs include the Columbia Sustainable U.S. Equity Income ETF (ESGS) , Columbia Sustainable International Equity Income ETF (ESGN) and Columbia Sustainable Global Equity Income ETF (ESGW) . ESGS has a 0.35% expense ratio, ESGN has a 0.45% expense ratio and ESGW has a 0.40% expense ratio.
The new Columbia Beta Advantage products provide exposure to companies that may offer sustainable levels of income as well as total return opportunity. Specifically, the underlying indices will screen for companies based on dividend yield, dividend growth and cash flow factors, which could help target those with the ability to support dividend growth.
Moreover, the benchmarks include a “sustainable” focus, or companies that adhere to environmental, social and governance (ESG) practices.
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Investing in ESG principles is a good way to help manage portfolio risks. Academic research reveal that strong governance mechanisms have helped diminish default risk and lower bond yields. Barclays also recently discovered that investment-grade bonds with higher ESG scores outperformed those with low ESG scores over the past 8 years.
“We’re excited about the launch of our first Beta Advantage funds. We believe that these types of strategies have the potential to help advisors and their clients meet important investment goals, such as generating income, growing assets and managing volatility,” Colin Moore, global chief investment officer at Columbia Threadneedle Investments, said in a press release.
The Columbia Beta Advantage ETFs will start with a MSCI benchmark and screen for dividend yields above 1% and ESG-scores above BB. The underlying indices will also implement a multi-factor model based on income related metrics and quality metrics. Lastly, the end resulting portfolio will weight components by dividend yield and the multi-factor-model score.
ESGS targets U.S. stocks excluding real estate investment trusts. ESGN include international developed market stocks excluding U.S. equities. Lastly, ESGW includes both U.S. and international stocks.
For more information on new fund products, visit our new ETFs category.