Spurned ESG ETFs Get a Boost as Vanguard Adds Most Since June

(Bloomberg) -- It’s been a long time coming, but exchange-traded funds that look to align their investments with buyers’ values are finally getting some love.

The Vanguard ESG U.S. Stock ETF, ticker ESGV, attracted $101 million last week, the largest weekly inflow for any socially-responsible fund since June, according to data compiled by Bloomberg. The fund’s assets grew 60 percent to $270 million thanks to one large trade, the data show.

Spurned ESG ETFs Get a Boost as Vanguard Adds Most Since June

Strategies that screen for environmental, social and corporate governance concerns have struggled to gain a foothold in the $3.7 trillion U.S. ETF industry, despite the number of funds quadrupling over the last three years. These products have attracted about $8 billion and, prior to last week, Vanguard’s ETF had not seen a weekly inflow larger than $22 million since it began trading in September.

“Most ESG ETFs are either narrowly focused with their criteria or so broad that they may not appeal to the audience they’re intended for,” said Todd Rosenbluth, director of ETF Research at CFRA Research. “These Vanguard products are trying to appeal to more of a broader swath of investors.”

The Goldman Sachs JUST U.S. Large Cap Equity ETF, which is based on the Russell 1000, was the last ESG ETF to take in more than $100 million in a week.

Higher Fees

Traditionally, many values-based ETFs have focused on themes, such as clean power or gender diversity. ALPS Advisors Inc. announced this week that it would shutter the Alps Workplace Equality Portfolio Fund, known as EQLT, next month “on consideration of the fund’s inability to attract significant market interest.”

Higher fees on ESG products have been one of the hurdles for these products in attracting assets. EQLT cost $7.50 for every $1,000 invested, more than the average $4.40 charged by ESG ETFs, data compiled by Bloomberg show. Vanguard’s product costs less -- $1.20 for every $1,000 -- but that’s still more than the 30 cents its $109 billion total stock-market ETF charges.

As prices on these funds come down, “we are going to see investors become more comfortable adding ESG ETFs into their portfolio,” Rosenbluth said.

©2019 Bloomberg L.P.