What is an ETF?

Briefly, an exchange-traded fund, or ETF, is an investment vehicle whose shares trade on a stock exchange, much like a stock. Like stocks, you can buy and sell ETFs throughout the trading day. Structurally, however, ETFs are more akin to mutual funds than they are to individual securities. They enable investors to buy or sell shares of a fund that seeks to replicate the performance of an underlying pool of securities – the index.

What are the advantages of ETFs?

ETFs trade just like stocks, so they’re priced on a real-time basis and are highly liquid. Like mutual funds, they offer broad-scale diversification through a single investment product. When compared to most actively managed mutual funds, however, ETFs typically offer lower fees and certain tax advantages.¹

What is Sustainable Investing?

Sustainable Investing is the full integration of environmental, social and governance (ESG) factors into investment analysis and decision making.  It seeks to deliver superior long-term investment performance by integrating traditional financial analysis with rigorous ESG analysis. The result, we believe, is a better, smarter way to invest – one that is particularly suited to today’s global marketplace.

What do the “E,” “S” and “G” in ESG Shares® stand for?

They stand for Environmental, Social and Governance criteria. How a company performs on the basis of sustainability issues or ESG factors is fast becoming a critical component of its overall financial performance. The indexes on which ESG Shares are based incorporate sustainability analysis and ESG criteria into index design and construction.

How do ESG Shares® let me take advantage of Sustainable Investing?
Our two funds, NASI and EAPS, give you the opportunity to invest in indexes comprised of companies in the United States and Canada, on the one hand, and developed markets around the world excluding the U.S. and Canada, on the other, that have been rigorously constructed on the basis of environmental, social and governance criteria. In each case, you are gaining exposure to companies that we believe are well positioned to take advantage of the global shift from industrial age economies to information age, sustainable economies.

How does Sustainable Investing contribute to the performance potential of ETFs?

There is a large and growing body of evidence (see below) indicating that companies with strong sustainability characteristics offer certain long-term performance advantages. Whether a company is a leading provider in an emerging “clean-tech” industry or recognized for its sound workplace practices, environmental record or corporate governance standards, investing in sustainability in our view makes good financial sense.

Is there evidence to support the claim that ESG factors have financial materiality?

Yes, quite a lot, actually. In recent years, companies as respected as Goldman Sachs, Innovest, CRA RogersCasey and McKinsey & Company have all released reports suggesting that companies with superior ESG or sustainability performance may be better long-term investments.²

What is Pax World’s connection to Sustainable Investing?

Pax World launched the nation’s first socially responsible mutual fund in 1971. Since that time, we have been a leader in the integration of ESG research and broader sustainability imperatives into investment analysis and decision making. In fact, Pax World was one of the very first investment management organizations to embrace Sustainable Investing as a distinct investment discipline – premised on the financial materiality of ESG factors. In our view, Sustainable Investing represents a better, smarter approach to long-term investing.  

Why has Pax chosen to partner with a company like MSCI?

Two reasons. First, MSCI is a skilled, experienced research organization and index creator and manager. Second, it has a heightened sensitivity to the role environmental, social and governance standards can play in investment portfolio construction and performance. In other words, it has skills that complement ours and organizational sensibilities that are consistent with our own.

How can I buy ESG Shares?

ESG Shares trade on the New York Stock Exchange (NYSE). You can buy them just the way you would a stock – through your full-service or discount brokerage account.

¹ESG Shares ETFs are not managed with an objective to avoid capital gains distributions. Since most ETFs are based on underlying indexes, they generally have lower portfolio turnover than many actively-managed mutual funds. What’s more, they allow investors to pay most of their capital gains upon final sale of the ETF, thereby delaying the tax consequences of owning the position until termination. This information is provided for informational purposes only, and should not be considered tax advice. Please consult your tax advisor for further assistance.
²Goldman Sachs – Goldman Sachs Global Investment Research, “Overview: Introducing GS SUSTAIN,” July 2, 2007. Innovest – Innovest Strategic Value Advisors, “Carbon Beta and Equity Performance: An Empirical Analysis: Moving from Disclosure to Performance," October 2007. McKinsey & Company – Christopher Grobbel, Jiri Maly, and Michael Molitor, “Preparing for a Low-Carbon Future,” McKinsey Quarterly, November 2004. United Nations Environment Programme Finance Initiative, “Show Me the Money: Linking Environmental, Social and Governance Issues to Company Value,” Asset Management Working Group, 2006.

ETFs are subject to risk similar to those of stocks, including those regarding short-selling and margin account maintenance. Ordinary brokerage commissions apply.