10 Years of Global Core Equity Lower Carbon ESG Screened
In June 2013, Dimensional launched the Global Core Equity Lower Carbon ESG Screened Fund. This was not our first time managing an ESG strategy. Dimensional had been managing funds using a similar methodology for US clients since 2008.
In 2013, sustainability investing was not yet mainstream. The Paris Agreement, a wide-encompassing treaty on climate change, would not be signed until nearly three years later. Initiatives such as the Task Force for Climate-Related Financial Disclosures did not exist. Sustainable Finance Disclosure Regulation (SFDR) was more than seven years away.
The Global Core Equity Lower Carbon ESG Screened Fund was launched with around €10 million in assets. For the first few years, interest came from a small, but passionate, group of early sustainability-minded investors; it took nearly four years for assets to cross the €100 million mark. The pace started increasing in 2017 and 2018 as concern about sustainability issues, and in particular climate change, became more widespread. In 2020 and 2021, ESG investing entered the mainstream, with clients increasingly using ESG strategies as their core approach. In June 2023, the fund crossed the €3 billion mark.
Assets under Management, Global Core Equity Lower Carbon ESG Screened Fund, in Millions EUR
For UK and European investors, Dimensional now offers several strategies based on the same climate-focused approach—three in equities and two in fixed income—totalling around €4 billion in assets. We believe that the success of these strategies is a testament to our philosophy, as outlined below.
- Follow sound investment principles. Like any of our Core funds, our Core Lower Carbon ESG Screened funds provide exposure to the drivers of higher expected returns—the size, value and profitability premiums in equities, and the term and credit premiums in fixed income—while maintaining broad diversification across securities and sectors.
- Price competitively. Between 2013 and 2023, we reduced the ongoing charges figure (OCF) on the Global Core Equity Lower Carbon ESG Screened Fund by more than 50%. With an OCF of 0.26%, the fund stands in the lowest-priced quintile of funds in its Morningstar category.1
- Listen to clients. Climate change is top of mind for many sustainability investors. Our ESG funds primarily aim to reduce exposure to companies driving climate change, while also applying targeted environmental and social exclusions.
- Approach data thoughtfully. Robust ESG strategies require robust ESG data. The funds rely on widely reported emissions figures, instead of on subjective ESG ratings amalgamating dozens of variables of varying quality.
- Communicate clearly. For example, refrain from making unsubstantiated claims about the real-world impact of an ESG strategy. An ESG strategy can exclude companies involved in tobacco production, but that does not reduce the amount of tobacco that these companies produce. See Navigating ESG Investing for more.
No one can predict what the next 10 years will bring. But our four decades of investing experience have made us confident that setting clear objectives and following sound investment principles increase the chances of good outcomes for investors.
Footnotes
- 1Morningstar Direct, as of June 30, 2023.
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The Emerging Markets Core Equity Lower Carbon ESG Screened Fund, Global Core Equity Lower Carbon ESG Screened Fund, Global Core Fixed Income Lower Carbon ESG Screened Fund, Global Short Fixed Income Lower Carbon ESG Screened Fund, Global High Profitability Lower Carbon ESG Screened Fund, Global Targeted Value Lower Carbon ESG Screened Fund and World Equity Lower Carbon ESG Screened Fund (the "ESG Funds") promote sustainability in accordance with Article 8 of Regulation (EU 2019/2088) on sustainability related disclosures in the financial services sector (SFDR). The ESG Funds do not have sustainability investment as their objective but as part of the ESG Funds’ investment policy, the Investment Manager does take into account the sustainability impact associated with securities when making investment decisions for the ESG Funds. While the ESG Funds promote sustainability and the Investment Manager takes into account sustainability impact considerations, the ESG Funds’ investments are not evaluated against the EU criteria for environmentally sustainable economic activities and, therefore, the “do no significant harm” principle does not apply to the ESG Funds’ investments. Consider the investment objectives of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus, KID and KIID carefully before investing. Information on sustainability related disclosures in the financial services sector (SFDR) pursuant to Regulation (EU) 2019/2088 in relation to the promoted fund is available at www.dimensional.com/SFDR.
Any references herein to “sustainable” or “sustainability” do not indicate that the ESG Funds commit to make sustainable investments within the meaning of the Sustainable Finance Disclosure Regulation (SFDR). The ESG Funds may promote environmental and/or social characteristics but do not commit to make sustainable investments.