Tracking Social Responsibility with DMXF

For many, 2021 is about fresh starts, limitless possibilities and good karma.

For investors looking to gain a few karma points in the stock market, iShares ESG Advanced MSCI EAFE ETF (NASDAQ:DMXF) may be an appealing exchange-traded fund (ETF). This fund was created to capture companies with favorable environmental, social and governance (ESG) ratings compared to similar companies in each respective sector.

Moreover, the fund works to avoid adding companies that are involved in less-than squeaky-clean business activities, such as those offering adult entertainment, alcohol, gambling, tobacco, genetically modified organisms (GMO) and for-profit prisons. Moreover, companies in the energy sector and those tied into the fossil fuel industry are pulled from the running as well.

In constructing its portfolio, DMX looks at companies in the broad MSCI EAFE Index, which includes 21 developed countries excluding the United States and Canada. These companies are rated based on their environmental, social and governance (ESG) risk (AAA being the best score and CCC being the worst), opportunities management and controversies scores, which range from zero to 10, with 10 being the most desirable ranking. The fund only selects companies with a ESG ranking of BBB or higher and a “controversies” score of three or above.

For a fairly new fund since its launch in June 2020, it has a pretty impressive financial overview. DMXF has $91.91 million in assets under management, net assets of $62.4 million and a modest expense ratio of 0.12%. It is fairly liquid, with an average daily monetary volume of $722,000 and a median average spread of 0.23%.

Since the fund was created after the COVID-19 outbreak, it was spared the harsh March dip that funds faced. As is evidenced by the chart below, DMXF had a modest start with an almost COVID-19-like dip at the end of October but then hit its stride and spiked greatly in the first two weeks of November. Its 52-week rise of $51.06 to $67.04 is proof of its upward momentum.

Courtesy of ETF.com

DMXF has 525 holdings, with 84.1% of the portfolio in large-cap stocks. As the fund excludes companies based in the United States and Canada, Japan makes up the majority of its country exposure at 33.2%, followed by France and Britain. Its top five holdings include ASML Holding NV (ASML), 2.65%; AIA Group Ltd (01299.JK), 1.70%; Toyota Motor Corp (7203), 1.67%; SAP SE (SAP.DE), 1.52% and Softbank Group Corp (9984), 1.39%. 

This is an ETF that practices what it preaches, and has an ESG score of AA, or an 8.14 out of 10, which shows its dedication to holding only funds with an ESG score of BBB or better, and controversies scores of three or above. Because of its high ranking, the fund may be more resilient in the face of environmental, social or governance disruptions, and this could prove favorable in the months and years ahead. 

So, for investors looking to gain a few karma points, an ETF with upstanding holdings and broad market exposure, iShares ESG Advanced MSCI EAFE ETF (NASDAQ:DMXF) may be a fund worth looking into.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.