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WisdomTree Investments strives to become a leader in the ESG space

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The Bottom Line:  WisdomTree Investments strives to become a leader in the ESG space, having rebranded a total of six existing ETFs since March 2020.

WisdomTree strives to become a leader in the ESG space

During the Q4 2020 earnings call held by executives of Wisdom Investments Inc. (WETF) on January 29, 2021, senior executives indicated that the company plans to be a leader in the ESG space and that it is “already ranked third in the US by ESG assets behind iShares and Invesco.” On the same day, WisdomTree Investment Management filed updated prospectuses for three existing ETF index tracking funds that formally reflected the adoption of a sustainable investing approach (refer to explanation below) in the form of excluding certain companies from portfolio investments. In doing so, WisdomTree expanded to six the number of funds in the US it manages pursuant to a sustainable investing mandate and a combined total of $2.3 billion. On a pro-forma basis, this shifts WisdomTree Investment Management to eighth place among 42 firms that offer sustainable ETFs and ETNs in the US.

WisdomTree Investments, Inc. is a publicly listed investment management company headquartered in New York that, through its subsidiaries in the U.S. and Europe, offers ETFs and Exchange Traded Products (ETPs) covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. As of December 31, 2020, WisdomTree managed approximately $69.2 billion in assets globally, including $26.0 billion, or 39%, in commodity and currency product offerings.

In March of last year, WisdomTree repurposed three existing ETFs by formally amending each fund’s prospectus to reflect the adoption of an ESG integration approach to investing, emphasizing stocks with positive ESG characteristics while also excluding companies involved in certain products and controversies. At the time, the total net assets of the three funds stood at $144.8 million based on net assets as of March 31, 2020. The three funds ended the year with $140.1 million in assets.

On the same day that WisdomTree Investments held its Q4 2020 earnings call, it also filed updated short form prospectuses covering three additional ETFs that will, effective January 29th, engage in certain exclusionary approaches. These three ETFs include WisdomTree China ex-State-Owned Enterprise Fund, WisdomTree Emerging Markets ex-State-Owned Enterprise Fund and WisdomTree India ex-State Owned Enterprise Fund, each of which had previously excluded state-owned enterprises that consist of companies with 20% government ownership. Together, these ETFs closed 2020 with $2,122.6 million in assets. The funds will also now exclude companies based “on environmental, social and governance (ESG) criteria.” As set out in each fund’s updated prospectus, the ESG criteria seeks to exclude from the eligible investment universe companies that (i) violate, or are at risk of violating, certain commonly accepted international norms and standards, such as United Nations and the Global Standards Screening guidelines; (ii) are significantly involved in controversial weapons, such as biological, chemical, cluster, nuclear or white phosphorous weapons or in anti-personnel mines; (iii) are significantly involved in the tobacco industry; (iv) are significantly involved in thermal coal activity, such as coal mining and exploration and coal-based power generation; or (v) do not meet such other ESG criteria as detailed in the Index methodology. Other ESG criteria do not appear to be further detailed in the Index methodologies.

On a pro-forma basis, with a combined total of $2.3 billion in ETFs managed pursuant to their respective mandates, WisdomTree would rank 8th among the 42 organizations offering sustainable ETFs and ETNs at year-end 2020 with a combined total of $93.1 billion in assets Refer to Table 1 for a listing of the top 10 firms.

Table 1: Top 10 ETF/ETN providers with total net assets and percent of total ETF/ETN assets as of 12-2020
Firm NameSustainable ETF/ETN Assets Under Management $Percent (%) of Total ETF/ETN Assets
iShares40,988,451,52744.0
J.P. Morgan17,502,634,09918.9
Invesco8,952,406,63218.9
Vanguard4,649,265,25018.9
Xtrackers3,467,465,51518.9
First Trust3,230,190,19918.9
Nuveen2,481,159,53518.9
Ark Financial1,960,464,89118.9
State Street1,802,918,81118.9
Hartford Investments1,202,549,39018.9
Cumulative Total86,237505,84992.6
Notes of Explanation: Assets under management as of 12-31-2020. Assts source-Morningstar; funds classificaitons and related research-Sustainble Research and Analysis LLC
Note of Explanation: While definitions continue to evolve, sustainable investing refers to a range of five overarching investing approaches or strategies that encompass: values-based investing, negative screening (exclusions), thematic investing, impact investing and ESG integration. Shareholder/bondholder engagement and proxy voting may also be employed along with one of more of these strategies that are not mutually exclusive.
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