First Trust launches Capital Strength ESG Leaders UCITS ETF

First Trust has launched the First Trust Global Capital Strength ESG Leaders UCITS ETF (FCSG) providing time-tested quality and low volatility factors with best-in-class ESG exposure in one transparent and liquid UCITS ETF.

The fund offers an actively managed investment approach providing the potential for long term sustainable returns through capital growth.  

Investing in a diversified portfolio of global equities with a leading metric based on environmental, social and governance related criteria, as defined by inclusion in the MSCI ACWI ESG Leaders Index (the “MSCI ESG Index”), the portfolio integrates First Trust’s propriety Capital Strength methodology to screen the stocks for inclusion. This strategy blends First Trust’s factor-based investing heritage with MSCI’s best-in-class ESG strategy designed to generate long-term sustainable returns.  

The MSCI ESG Index is a capitalisation weighted index that provides exposure to companies with high ESG performance relative to their peers. It provides exposure to large and mid-cap companies across 23 developed and 27 emerging market countries and systematically excludes companies involved in alcohol, tobacco, gambling, nuclear power, conventional weapons, and civilian firearms.   

The capital strength methodology evaluates issuers to include: a minimum three-month average trading volume of USD5 million, a minimum of USD1 billion in cash and short-term investments, long-term debt to market capitalisation ratio of less than 30 per cent, as well as a return on equity of greater than 15 per cent. The resulting portfolio is then adjusted to 50 stocks, taking into account short- and long-term volatility measures as well as country and sector concentration. The 50 stocks are then equally weighted. Between rebalance dates the MSCI ESG rating of each stock is reviewed and any shares of issuers with a rating below “BB” are removed.   

Rupert Haddon, Managing Director and Head of Sales First Trust Global Portfolios says: “We are seeing an increasing appetite from investment managers and their clients for investment solutions that marry robust financial performance through a socially responsible lens. We are thrilled to be launching the First Trust Global Capital Strength ESG Leaders UCITS ETF which blends two philosophies into one liquid, transparent and cost-effective solution balancing high quality names with responsible investing wrapped into a rules-based actively managed ETF.”  

Haddon continues: “By selecting the best performing ESG companies combined with the Capital Strength fundamental methodology, this new fund can provide investors with a sustainable competitive advantage and a superior long-term investment opportunity. This ETF also offers downside protection through a combination of its high-quality focus and by applying low volatility metrics while focusing on a portfolio of the highest scoring ESG companies. We are delighted to be bringing this to market.”   

Axel Kilian, Managing Director, Head of Client Coverage EMEA at MSCI, says: “The MSCI ESG Leaders Indexes target companies that have the highest ESG rated performance in each sector of the parent index. The index suite utilises MSCI’s award winning ESG Research and ESG Ratings to identify companies that have demonstrated an ability to manage their ESG risks and opportunities and are therefore eligible for inclusion.”  

The Fund is aimed at wealth managers, discretionary fund managers, advisers and institutional investors, with a total expense ratio of 0.75 per cent the portfolio will be rebalanced semi-annually and will available on the London Stock Exchange and Euronext Amsterdam from 10 March 2021.