Horizons ETFs’ sustainability fund achieves 16.95 per cent total return in its first year
Horizons Global Sustainability Leaders Index ETF (ETHI) attained a 16.95 per cent total return in its first year, while maintaining a portfolio of environmental and socially responsible global, large-cap companies.
ETHI’s management fee has been reduced from 0.65 per cent to 0.45 per cent.
ETHI first started trading in November, and was Horizons ETF’s first socially responsible investing (SRI) ETF. ETHI seeks to replicate the performance of the Nasdaq Future Global Sustainability Leaders Index net of expenses. ETHNI gives investors the opportunity to access a genuinely lower carbon footprint and SRI-screened passive global investment portfolio.
"Socially responsible investing is becoming increasingly more popular with investors as they seek to align their investment dollars with companies that are aligned with their social values essentially putting their money where their mouths are," says Steve Hawkins, President and CEO of Horizons ETFs. "A big criticism and myth of socially responsible investing is that investors would have to sacrifice returns if they invested in a portfolio that lets them feel good about how their money is used. ETHI clearly demonstrates that investors can both generate attractive returns and feel good about how they invest."
For the one-year and year-to-date periods ending 31 October 2019, ETHI returned 16.95 per cent and 23.14 per cent, respectively, both on a total return basis.
This is, in part, because the sectors that have done well from a performance basis over the last five years—predominantly technology stocks—have a lower carbon footprint. ETHI's index tends to overweight the technology sectors relative to their weights in broader indices.
"The economic costs of climate change will be drastic—companies that aren't prepared or working toward a better tomorrow could be a significant risk for investors to own," says Hawkins. "ETHI's portfolio of global, large-cap climate change leaders are the best situated to weather the storm, so to speak, while seeking to deliver strong returns and a better future."
ETHI provides exposure to 100 of the world's largest companies (by market capitalisation) that have demonstrated a core commitment to environmentally sustainable business practices.
The Index screens for qualifying equities based on the following factors:
1 Companies must not be engaged in activities considered inconsistent with SRI principles, including fossil fuel production, armaments, tobacco, gambling, animal cruelty and more.
2 Companies must either have a carbon impact at least 60% lower than their industry's average or be engaged in activities that can help reduce carbon use by other industries.
3 Companies must have at least one woman on their Board of Directors.
4 Companies are selected from developed markets and must meet market cap and liquidity requirements.
"We launched ETHI because we saw a gap in the Canadian market for a truly socially responsible ETF," says Hawkins. "ETHI's index goes further than traditional environmental, social governance (ESG) funds in Canada by taking a fully prohibitive stance against holding any fossil fuel producers and major emitters. In addition, the index's other screening rigours mean that socially-conscious investors do not need to compromise on their values when choosing a strong portfolio."