With environmental, social and corporate governance (ESG) investing all the rage, Merrill Edge, the robo-advisory service of Bank of America Merrill Lynch, has added ESG scoring to its trading platform. First spotted by InvestmentNews, Merrill Edge updated the dashboard for its online trading service earlier this week to include ESG scores from MSCI.
The MSCI ESG score enables investors to identify companies based on their contributions to the environment, society at large and governance. Companies that land a score of "AAA" from MSCI are doing a good job, while those with a score of "CCC" are performing poorly from an ESG perspective. With the scoring, Merrill Edge investors will be able to pinpoint investments in which the companies are leaders in ESG and avoid those that are ranking poorly.
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The addition of the MSCI ESG score comes as more investors are interested in investing in companies that are doing right by the public. ESG exchange-traded funds still represent a small portion of the overall smart beta investment landscape, but fund providers see an opportunity to grow in that area. After all, millennials care about the environment and society, and they tend to invest in companies that align with their values.
But it's not just millennials – all sorts of investors want to see companies step up their game when it comes to things like governance and the environment. In January, Goldman Sachs Asset Management (GSAM), the asset management unit and the exchange-traded funds department at The Goldman Sachs Group, Inc. (GS), filed plans with the Securities and Exchange Commission to launch an ETF tracking an index from JUST Capital Foundation that follows companies with just or good business practices.
BlackRock, Inc.'s (BLK) iShares unit, the world's largest ETF sponsor, offers the two biggest ESG funds, but other issuers are finding ESG success as well. State Street's SPDR SSGA Gender Diversity Index ETF (SHE) is less than two years old and has almost $370 million in asset under management. That fund seeks exposure to U.S. companies that "demonstrate greater gender diversity within senior leadership than other firms in their sector." Meanwhile, Oppenheimer offers two ESG ETFs, while Nuveen's Nushares features a suite of eight newly minted ESG funds. Currently, there are around 50 U.S.-listed ETFs meeting ESG criteria, none of which have $1 billion in assets under management.
InvestmentNews noted that other updates to the Merrill Edge trading platform include a simplified portfolio analysis and performance review as well as the ability for customers to compare their performances with the broader market.