Latest Launches

Putnam launches sustainable target-date series for retirement savers

The target-date funds will invest in actively managed sustainable and ESG-focused exchange-traded funds managed by Putnam.

Putnam Investments is now offering a series of sustainable target-date funds for the retirement market.

The asset manager announced Friday the launch of Putnam Sustainable Retirement Funds, which will invest in actively managed sustainable and environmental, social and governance-focused exchange-traded funds managed by Putnam. Putnam Sustainable Retirement Funds will invest in ETFs across the asset classes managed by the firm.

Putnam says the funds, which are a revamp of its RetirementReady TDFs, will adhere to a retirement glide path philosophy similar to that of the firm’s other target-date offering, Putnam Retirement Advantage, a series that offers vintages for every five years from 2025 through 2065, along with a maturity fund.

The same team that manages the Putnam Retirement Advantage will be responsible for the glide path and both the tactical and ETF allocations of the Putnam Sustainable Retirement target-date suite.

Putnam is launching the new TDF series in the wake of the Department of Labor’s new rule for retirement plans taking effect last week; the rule allows retirement plan sponsors to consider ESG factors when vetting investments.

“As the retirement marketplace continues to evolve and grow, there is tremendous appetite for meaningful product innovation that creates greater choice of offerings to help working Americans achieve their financial goals,” Robert L. Reynolds, president and CEO of Putnam Investments, said in a statement.

Steven P. McKay, Putnam’s head of global defined-contribution investment only, noted in the statement the “growing interest’ in ESG investing in defined-contribution plans.

“We are excited to deliver this innovative approach to target-date investing to the retirement savings marketplace,” McKay said.

Putnam had over $170 billion in assets under management at the end of January, according to the company.

This story first appeared on InvestmentNews.

Fidelity readies ESG target-date series

The firm would be one of several companies providing sustainable target-date funds in the US

The small ESG target-date market will soon have a new entrant, one of the biggest names in the US mutual fund and retirement business — Fidelity Investments.

On Friday, the company began positioning itself to compete in the sustainable target-date fund business, filing with the Securities and Exchange Commission for a new line of products, the Fidelity Sustainable Target Date series. The firm also filed initial prospectuses for four other sustainability-themed products — an emerging markets fund, a non-US developed markets fund, an investment-grade bond fund and a US market fund.

Those filings come on the same day Putnam Investments announced it had opened its Sustainable Retirement Funds, an existing series that recently received an ESG overhaul. And news of both lines of funds arrived just after the Department of Labor’s new rule governing the use of ESG in retirement plans took effect. That rule specifically allows plan sponsors to consider ESG factors and use sustainability-themed products as the default investments in 401(k)s.

Only a small slice of the 401(k) market includes sustainability-themed funds, and ESG target-date funds are exceedingly rare on plan menus. Plan sponsors have been wary for years about opting for them, in part due to wavering guidance from the DOL that changed with presidential administrations. But the rule — and the availability of ESG target-date funds from major providers — could help change that.

There appears to be demand from workers, with multiple surveys from fund groups indicating that plan participants would feel good about having their retirement savings invested sustainably and that in some cases it would make them feel better about their employers.

Currently, there are only a handful of players in the 40-Act ESG target-date market. Natixis was the first to launch a series, the line of Sustainable Future Funds, which is the only one with at least a five-year performance track record. The other incumbent was BlackRock’s LifePath ESG Index series, which launched in 2020.

Fidelity is the second-largest target-date mutual fund provider in the US, with $460bn in assets under management as of the end of 2021, according to data from Morningstar. The firm trails Vanguard, which had $1.2trn as of that time. Those figures don’t include assets in target-date collective investment trusts, which firms such as T. Rowe Price have seen customers move into from the mutual fund versions of their products.

Fidelity’s forthcoming ESG target-date line would invest at least 80% of its assets in securities and the company’s own index funds that pass certain sustainability criteria, along with other Fidelity funds that are invested in government debt securities that have favorable ESG characteristics, according to the prospectus filed with the SEC.

The company would evaluate ESG characteristics using its own research as well as third-party data.

The funds will be available in vintages ranging from 2010 to 2065, along with a retirement income fund. Net fees range from 41 basis points to 49 bps, varying by vintage. The portfolio managers are listed as Finola McGuire Foley and Bruno Weinberg Crocco.

Other funds

Along with the target-date series Fidelity is prepping, it indicated in the regulatory filings Friday that it is planning a Sustainable Investment Grade Bond Fund, Sustainable Emerging Markets Fund, Sustainable Non-US Developed Markets Fund and Sustainable US Market Fund. Those funds will only be available as underlying investments within other Fidelity funds as well as to 529 college savings plans Fidelity manages and within the company’s collective investment trusts.

The portfolio managers for the Sustainable Investment Grade Bond Fund will be Celso Munoz and Ford O’Neil.

The Sustainable Emerging Markets Fund, Sustainable Non-US Developed Markets Fund and Sustainable US Market Fund will be managed by Michael Robertson, Anna Lester, George Liu and Shashi Naik, according to the filings made with the SEC.

Fidelity declined to comment, with a spokesperson stating in an email that the filings are “preliminary registration statements, so it would be premature to talk about the funds at this time.”

BNY files for Women’s Empowerment ETF

Subadviser Newton Investment Management screens and selects companies

BNY Mellon is readying an ETF aiming to invest in companies that help improve the quality of life for women, according to a regulatory filing made last week.

The BNY Mellon Women’s Empowerment ETF will focus on holdings that support “the process of becoming stronger and more confident, especially in controlling one’s life and claiming one’s rights.” Such companies show dedication to gender equity in the workplace or have products or services that “contribute to the ability of women to meet daily life needs, thereby promoting their productivity,” the firm stated in an initial prospectus filed with the Securities and Exchange Commission.

The subadviser for that fund, BNY subsidiary Newton Investment Management North America, initially screens potential investments based on qualitative and quantitative metrics around women’s empowerment. That includes representation of women across companies’ organizational structures, demonstrated commitments to gender equality and the availability of workplace benefits such as paid family leave and flexible work arrangements.

Newton gives a score to companies, selecting those for further consideration if they are in the top 50% of their peer group. It can also include companies that help support “the ability of women to meet daily life needs,” such as those that provide meal delivery, childcare, eldercare, breast milk substitute, employment placing or employment training.

After that screening, the subadviser picks companies with promising financial characteristics, according to the filing.

Portfolio managers on the forthcoming ETF are Newton’s head of sustainable equities, Julianne McHugh, and senior portfolio manager Karen Behr.

Expense information for the ETF was not included in the filing.

Touchstone files for ‘climate transition’ ETF

Managed by Lombard Odier's Paul Udall

Touchstone Investments is preparing its fifth ETF, a product that would seek to invest in companies benefitting from “a transitioning climate environment”.

The company filed an initial prospectus January 5 for the Touchstone Climate Transition ETF. The fund would seek out equity securities that the fund’s subadvisor, Lombard Odier Asset Management, sees as “leading the development of solutions for a net-zero carbon emissions and climate-resilient economy, and/or may benefit from a transition to a carbon-constrained world and adaptation to a carbon-damaged world”. That includes companies seen as solutions providers, transition leaders and those providing “adaptation opportunities”, according to the filing.

Lombard Odier’s Paul Udall is listed as portfolio manager for the forthcoming ETF, while Peter Burke-Smith would be assistant portfolio manager.

Listen to ESG Clarity EU’s podcast with Paul Udall here.

Touchstone has several existing ETFs, none of which appear to have a climate-related or ESG focus. However, two of the firm’s mutual funds do – the Non-US ESG Equity Fund and the International ESG Equity Fund.

The forthcoming ETF is actively managed and would be listed on the Chicago Board Options Exchange. It has net expenses of 69 basis points.

Engine No. 1 preps scarcity-themed ETF

The actively managed ETF would hold companies focused on addressing resource scarcity

The small asset management firm that less than two years ago won board seats at Exxon Mobil is planning to launch its third ETF.

Last Friday, Engine No. 1 filed an initial prospectus for its Transform Scarcity ETF. That product, which could commence trading in less than three months, would invest in 20 to 60 small to large companies that are addressing current and future resource scarcity, according to the filing. That includes companies that “are transforming their own or others’ use of scarce resources within their products, services or business operations, relying on more sustainable alternatives … innovating renewable technologies or creating more efficient processes that recycle, reuse or regenerate,” the firm stated in the prospectus.

The categories of scare resources include food and agriculture; water; land; and people, with the latter ranging from education and skills training to reproductive services.

The actively managed ETF would be overseen by Engine No. 1 Director of ETF Portfolio Management Molly Landes, active ETF group leader Eli Horton and founder Christopher James.

Engine No. 1 currently has two ETFs: the passively managed $366m Transform 500 ETF; and the actively managed $89m Transform Climate ETF.

A public relations group that works for firm said in an email that it would not comment about the forthcoming ETF.

Engine No. 1 made headlines in 2021 following a historic proxy vote at Exxon Mobil, with three of the asset manager’s nominees winning seats on the company’s board. The firm had engaged with Exxon over transitioning to a lower-carbon business, its long-term capital allocation discipline and other issues.

New ETF bets on companies led by women

Hypatia Women CEO ETF leverages the logic that female executives represent a rare level of excellence

Asset manager Hypatia Capital is hoping to ride a wave of research pointing to the strength of companies with women in top leadership positions.

The Hypatia Women CEO ETF (WCEO), which debuts Monday, is an actively managed strategy that aims to capture performance alpha by investing in companies with female executives and significant female representation on boards of directors.

The ETF is expected to generally follow the Hypatia Women CEO Index, which tracks female-led companies with market capitalizations of at least $500m.

Part of the case being made for investing in companies led by women reflects the premise that it’s more difficult for women to reach the top executive ranks and therefore female leaders are more likely to possess exceptional leadership and management skills.

“Women who are able to make it into CEO roles have to be much better than their male counterparts,” said Deborah Fuhr, founder of research firm ETFGI.

“The thesis behind it seems to be supported by more and more research,” Fuhr said. “This product plays into a theme of looking at the way ESG and diversity and equity is growing in importance. I think many retail investors will understand this.”

A 2022 study by McKinsey & Co. showed that while some progress is being made, women are still underrepresented in the ranks of top management.

According to the report, women occupy 26% of C-suite positions, which is up from 20% in 2017. The issue is that white men still fill 61% of C-suite level positions.

The report cited a “broken rung” in the ladder toward senior leadership.

“For every 100 men promoted from entry level to manager, only 87 women are promoted, and only 82 women of color are promoted,” the report states. “As a result, men significantly outnumber women at the manager level, and women can never catch up. There are simply too few women to promote into senior leadership positions.”

The WCEO fund is far from the first attempt to the tap into the skills and expertise of women.

“This new ETF follows in the footsteps of the SPDR MSCI Gender Diversity ETF (SHE) that has faced some challenges to gathering assets,” said Todd Rosenbluth, head of research at VettaFi.

“While demand for ESG ETFs slowed in 2022, some investors have strong conviction in the importance of female leadership,” Rosenbluth added

Launched in 2016, SHE has grown to just $207m. The ETF is up 2% so far this year but lost almost 22% last year.

That compares to the S&P 500 Index, which is up 1.5% this year and lost 18% last year.

The Impact Shares YWCA Women’s Empowerment ETF (WOMN) is another example of a strategy tapping into the same general theme without much success so far. Launched in 2018, WOMN has grown to just $33m. The fund is up 2.3% this year after declining by 18% last year.

This article first appeared in InvestmentNews.

Search ESG Clarity