Nearly three months after Vanguard made a splash when it announced plans to launch two low-cost exchange-traded funds based on specific environmental, social and governance (ESG) criteria, the company on Thursday debuted the Vanguard ESG U.S. Stock ETF (ESGV) and Vanguard ESG International Stock ETF (VSGX).
The ESGV fund tracks the FTSE U.S. All Cap Choice Index composed of large-, mid- and small-cap U.S. stocks and covers more than 80 percent of the U.S. equity market capitalization. The VSGX product follows the FTSE Global All Cap ex U.S. Choice Index made up of large-, mid- and small-cap stocks in developed and emerging international markets, excluding the U.S. This index includes nearly 70 percent of the international equity market capitalization.
Both indexes are market cap-weighted and apply ESG screens that exclude companies engaged in the following industries: adult entertainment, alcohol, tobacco, weapons, fossil fuels, gambling and nuclear power.
They also exclude companies not meeting certain diversity criteria, as well as the labor, human rights, anti-corruption and environmental standards defined by the U.N. Global Compact Principles.
The estimated expense ratios are 0.12 percent for the domestic-focused ETF and 0.15 percent for the international-oriented fund. They can be bought commission-free from Vanguard and are available on other major trading platforms.
Matthew Brancato, head of Vanguard’s portfolio review group, noted in a press release the funds’ exclusionary ESG screening means they might perform differently than the broader market.
Vanguard is no stranger to the ESG space—it launched the Vanguard FTSE Social Index Fund (VFTSX) in 2000. That mutual fund has $5.2 billion in assets under management and charges an expense ratio of 0.20 percent. Unlike Vanguard's market cap-agnostic ESG ETFs, this mutual fund is primarily a large-cap vehicle (with more than 11 percent allocated to mid caps).
Vanguard also offers ESG-related products in Europe and Australia.