Invesco licenses the ESG benchmark to launch a new ETF
Index provider S&P Dow Jones Indices (S&P DJI) announced today the launch of the S&P 500 Equal Weight ESG Leaders Select Index, providing exposure to investors to an equal-weighted, ESG-focused version of the preeminent S&P 500 Index.
The S&P 500 Equal Weight Index includes the same constituents as the S&P 500, but allocates each company an equal weight (0.2% each), while the underlying index utilizes a float-cap weighting. The new ESG version of the index starts with the same equal weighted investible universe, and employs exclusions for companies involved in certain business activities, such as arctic oil and gas exploration or gambling, among others, and companies with disqualifying United Nations’ Global Compact (UNGC) scores or other ESG controversies. The index also screens out companies with S&P DJI ESG scores in the bottom 25% of each global GICS Industry Group.
Overall, the index targets approximately 40% of the constituents for inclusion from each GICS group based on their ESG performance and profiles. According to S&P DJI, the resulting index provides 23% higher exposure to companies that report quantifiable environmental indicators, 13% higher exposure to companies with targets and initiatives to reduce emissions, 21% higher exposure to companies that monitor and disclose female representation across their organization, and 20% higher exposure to companies with publicly available anti-corruption policies.
Margaret Dorn, Senior Director, Head of ESG Indices, North America, S&P Dow Jones Indices, said:
“The launch of the S&P 500 Equal Weight ESG Leaders Select Index reflects the continued evolution of ESG investing by combining a smart beta factor – equal weight – into an ESG benchmark. S&P DJI continues to expand its family of ESG benchmarks with a goal of further encouraging the adoption of sustainable business practices across all industries.”
With the introduction of the ESG index, S&P DJI also announced a license agreement with Invesco Capital Management for a new ETF, the Invesco ESG S&P 500 Equal Weight ETF (RSPE) launching today, tracking the new benchmark.
John Feyerer, Head of Innovation and Commercialization, ETFs & Indexed Strategies, Invesco, said:
“Invesco is excited to continue its long partnership with S&P Dow Jones Indices, licensing the new ESG version of its equal weighting the S&P 500 Index to bring investors another choice in how they want to access the benefits of equal weight investing.”
According to Invesco, the new ETF will provide investors with the benefits of equal weighting, including mitigation of concentration risk, diversification, and more access to mid- and small-cap equities, along with an improved ESG score. Invesco launched its S&P 500 Equal Weight ETF (RSP) in 2003, and it has outperformed its cap-weighted counterpart by net asset value by 88% cumulatively since inception. RSP has grown to over $30 billion in assets under management, generating over $7 billion in net new assets in 2021 alone.
John Hoffman, Americas Head of Invesco ETFs and Indexed Strategies, said:
“Invesco pioneered smart beta1 ETF investing nearly 20 years ago and we have been a leader in ESG ETFs for over a decade. RSPE brings these two concepts together, creating the simplest way to invest in a balanced portfolio of the ESG leaders of the S&P 500 Index. We are pleased to collaborate with S&P Dow Jones Indices today to bring investors the addition of ESG to smart beta screens through the Invesco ESG S&P 500 Equal Weight ETF.”