Interactive Investor

Fee cut means ESG-screened S&P 500 ETF now as cheap as normal index

23rd June 2021 10:34

Tom Bailey from interactive investor

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Franklin Templeton has temporary trimmed the fee for its Paris Climate Agreement-screened S&P 500 ETF. 

Franklin Templeton is temporarily trimming the fee on one of its leading climate change-focused exchange-traded funds (ETFs), bringing its yearly fee to single digit levels.

The Franklin S&P 500 Paris Aligned Climate ETF (LSE: 500P) will cut its fee (it uses the total expense ratio charging method) from 0.15% to just 0.07%. It is important to note that the fee cut is only temporary. The fee cut will apply until 31 May 2022. After that date, the fee will potentially return to 0.15%, or at least be raised higher than 0.07%.

The temporary fee cut brings the fee down to levels charged by big-name ETF providers offering access to the US market. For example, the iShares Core S&P 500 ETF USD GBP (LSE:IUSA) has an ongoing charge of 0.07%.

However, the Franklin S&P 500 Paris Aligned Climate UCITS ETF, as the name suggests, uses an environmental screen. This ETF is one of several that use a screen to ensure that companies in the portfolio are aligned with the Paris Climate Agreement goal to limit the increase in global average temperatures to below 2°C above pre-industrial levels.

Typically, environmentally screened indices are more expensive to track.

For example, the iShares MSCI USA SRI ETF (LSE:SUAS), has an ongoing charge of 0.20%. Meanwhile, the Xtrackers MSCI USA ESG ETF 1C GBP (LSE:XESU) charges 0.15%. So the new fee charged by the Franklin S&P 500 Paris Aligned Climate ETF is now below similar ETFs.

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