Invesco is to offer investors an ESG-tilted version of its successful Invesco S&P 500 Equal Weight ETF (RSP).
The Invesco ESG S&P 500 Equal Weight ETF (RSPE) makes it easy to invest in an equal weight ESG solution that captures many of the companies of the S&P 500 Index, furthering investor choice for equal weight smart beta.
The firm writes: “Invesco pioneered smart beta 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,” says John Hoffman, Americas Head of Invesco ETFs and Indexed Strategies. “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.”
Since RSP launched in 2003 and started the smart beta conversation, the smart beta space has matured and become a ubiquitous part of investors’ portfolios. The benefits found from equal weighting the S&P 500 Index – a strategy that has been outperforming its cap weighted benchmark by net asset value 88 per cent cumulatively since inception – continues to gain traction with investors, making RSP one of the largest smart beta ETFs in the world with over USD30 billion in assets under management (AUM).
In 2021, RSP generated over USD7 billion in net new assets as investors looked to equal weight as a way to help mitigate concentration risk, gain diversification, more access to mid- and small-cap equities and as a potentially better core. RSPE will offer the same benefits of the equal weight investing, helping to mitigate concentration risk in a low-cost, tax efficient manner5, but with an improved ESG-score.
RSPE, which tracks the S&P 500 Equal Weight ESG Leaders Select Index®, starts with a universe of constituents of the S&P 500 Equal Weight Index. The S&P 500 Equal Weight ESG Leaders Select Index then uses a robust ESG-overlay, including an integrated ESG-filter methodology and S&P DJI ESG Scores, to select ESG-leaders from each industry group in the S&P 500 Equal Weight Index. This methodology integrates ESG into a broad based, equal weight benchmark to offer a new choice for investors who are interested aligning their personal ESG values to a strategy known for being a core holding.
Both RSP and RSPE are priced at a total expense ratio of 0.20 per cent, ensuring that price does not need to factor into a decision around a client’s preference for investing in either of these two equal weight ETFs.
“S&P Dow Jones Indices has been a pioneer in ESG, providing benchmarks for investors seeking to align their investment goals with their individual values for over 20 years,” says Margaret Dorn, Senior Director, Head of ESG Indices, North America, S&P Dow Jones Indices. “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 into an ESG benchmark. We are excited to license this Index to Invesco to expand the opportunities of equal weight into the ESG environment.”
The S&P Equal Weight ESG Leaders Select Index measures the performance of securities from the S&P 500 Equal Weight Index and targets 40 per cent of the number of constituents of each Global Industry Classification Standard (GICS) Industry Group, using an S&P DJI ESG score as the defining characteristic. The index also applies exclusions based on companies’ involvement in specific business activities, performance against the principles of United Nations’ Global Compact (UNGC), and involvement in relevant ESG controversies. The S&P Equal Weight ESG Leaders Select Index is rebalanced annually and reweighted on a quarterly basis.