Index ETFs offer ESG-conscious fixed income exposure as well as challenger tech companies at the edge of innovation
The TD Morningstar ESG Canada Corporate Bond Index ETF and TD Morningstar ESG U.S. Corporate Bond Index ETF – trading on the TSX as TMCC and TMUC, respectively – are designed to track the performance of corporate bond indexes that measure the investment return of fixed-income securities from issuers with higher ESG ratings than those of their peers.
"At TDAM, we are always looking for more ways to help investors align their investments with sustainable options," said Priti Shokeen, vice president & director, ESG Research & Engagement.
According to Shokeen, the new ESG bond index ETFs offer exposure to investment-grade fixed-income securities that also meet “rigorous ESG criteria” – they eliminate companies with specific product involvements such as tobacco, small arms, and controversial weapons while accepting companies with low ESG risk ratings.
With a management fee of 0.15% for TMCC and 0.20% for TMUC, they provide a low-cost option for investors. They’re also made to exhibit similar interest rate sensitivity, yield, sector weights, and credit-quality as their parent indexes.
TDAM has also introduced the TD Global Technology Innovators Index ETF, trading as TECI on the TSX. It aims to track the performance of a technology innovators index, which measures the investment return of innovator tech firms. The members of the index are selected based on higher annual growth rates in revenue, return on invested capital and operating margin expansion relative to their peers, with mega-cap tech stocks being excluded.
“This new ETF is a great way to invest in the technology of tomorrow, today," said Dino Vevaina, vice president & director and portfolio manager, TDAM. "Investors can participate in the growth potential of global companies on the forefront of technology innovation without being overweight in mega-cap tech companies.
The new ETFs were constructed in partnership with the index construction capabilities and research of Morningstar, as well as the ESG research, ratings, and data capacity of Sustainalytics, which Morningstar acquired last year.
"We're so excited to build on our ESG collaboration with TDAM, extending beyond ESG equity indexes to provide our ESG fixed income indexes as well," said Katie Binns, senior product manager, Fixed Income & Multi-Asset Indexes at Morningstar, Inc. "Sustainable investing is a rapidly growing part of investor portfolios and providing a consistent multi-asset lens to ESG risk considerations is increasingly important to clients.