Fund in Focus: CI MSCI World ESG Impact Fund

Category-beating year-to-date performance

Investor interest in funds with an environmental, social, and governance (ESG) focus continues to grow, as fund companies tailor more offerings to meet demand. It’s not hard to understand why as mounting concerns over climate change, the environment, human rights, and corporate behavior compete with raw return numbers for the attention of the growing cohort of ESG-sensitive investors.

New products in both mutual fund and exchange-traded fund structures are coming to market with increasing frequency as fund companies compete to fill this new demand.

One of the latest launches is the CI MSCI World ESG Impact Fund Unhedged from CI Investments. It is designed to track the MSCI World ESG Select Impact ex Fossil Fuels Index, an index that invests in leading global companies whose products and services have a positive impact on the environment and society.

But wait, there’s more. This offering also avoids companies that have fossil fuel reserves used for energy purposes as well as companies that are involved in severe controversial events. The fund provides exposure to companies involved in alternative energy, environmental causes, basic needs such as nutrition and affordable housing, and empowerment, which includes education and providing financing for small- and medium-sized businesses.

In addition to fossil fuels, the fund also avoids companies involved in alcohol production, gambling operations and support services, tobacco production, nuclear power generation, and weapons manufacturing.

The underlying index that the fund tracks is still very new, having debuted last July. However, MSCI has created a simulation of the index using the same criteria that is used to select stocks today. Perhaps not surprisingly, the performance of the index roughly matches that of the broader index, The general message of this is you don’t necessarily have to sacrifice returns to invest with an ESG focus. The fund is also available as an ETF, CI First Asset MSCI World ESG Impact ETF (Unhedged) (NEO: CESG.B).

As of Aug. 30, the top holding was electric vehicle and clean energy firm Tesla Motors Inc., constituting 6% of fund assets. Other top holdings included consumer products company Procter & Gamble Co., automotive supplier Valeo SA, flooring company Mohawk Industries Inc., and IT company Equinix Inc. About half the fund is geographically weighted to U.S. equities, with 48% in international equity. Sectorally, 37% of the fund was focused on consumer goods, while healthcare, at 24%, constituted the second-largest sector allocation.

The fund is off to a good start this year, posting a year-to-date return of 7.4% to July 31 compared with the Global Equity category average of -0.3%.

Perhaps the most attractive part of this new offering is its cost. The management fee for the F-class version and the ETF comes in at a very respectable 0.55%, while the full-freight A class mutual fund units has a fee of 1.55%, for an MER of 1.87%.

This fund is certainly on my radar. If I have the potential to generate an index-like return while helping to make the world a better place, why wouldn’t I consider it?

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.