Endowus launches ESG investment portfolios + ESG explained

Endowus has launched ESG investment portfolios to retail investors, which allows investors to invest in a diversified portfolio of companies in both equities and fixed income across a variety of ESG strategies.

ESG explained

First of all, let’s break down what some of the acronyms that are flying around. ESG stands for Environmental, Social, and Governance.

ESG portfolios can be exclusionary – i.e. they eliminate companies involved in certain industries (e.g. fossil fuels and oil and gas) or integrated into the portfolio – where ESG metrics are used to select and weight companies that consider environmental, social and governance issues.

ESG portfolio construction can be varied among different issuers and even within the same issuer. For instance, there might be different products that cater to varied objectives; BlackRock for example, has ESG Aware and ESG Leaders ETF strategies with very different construction methodologies.

Incorporating ESG strategies into your portfolio

ESG investing can be useful if you are looking to not only achieve financial returns but also incorporating some social, governance and environmental objectives as part of a holistic investment portfolio.

You might want to consider how an ESG portfolio fits into your overall asset allocation and investment philosophy. For instance, a core portfolio incorporating ESG means you’d need to look for broad market exposure in your ESG portfolios. This means looking at funds or ETFs that do not deviate too much from the broad market index.

On the other hand, those looking to complement an existing core portfolio (e.g. a passive total stock market index) can consider satellite exposures to ESG strategies. This means perhaps adopting a narrower, and more thematic ESG strategy in your portfolio.

Endowus ESG portfolios

Endowus has brought sustainable investing through multi-asset ESG portfolios from top fund managers to the masses with their latest launch.

ESG portfolios have been previously dominated by institutional investors and private banks, coupled with high fees – making them out of reach for individual investors.

Through their offering, investors can now do good and invest well through them, at low costs (via 100% trailer fee rebates, transparent all-in management fee).

Investing through Endowus also brings benefits such as pre-screening of funds by Endowus Investment Office, portfolio management and SGD-denominated portfolios so you’re spared any FX risk and transaction cost.

An investment in their 100% ESG portfolio has also outperformed the benchmark (MSCI All-Country World Index).

Endowus ESG Portfolio vs Benchmark

What are the funds that Endowus would be investing in?

Endowus currently deploys its investment funds through its ESG strategy into the following funds:

  • Mirova Global Sustainable Equity Fund
  • Schroder ISF Global Sustainable Growth Equity Fund**
  • Schroder ISF Global Climate Change Fund*
  • JPM Global Bond Opportunities Sustainable Fund*
  • PIMCO GIS Climate Bond Fund*
  • UOB United Sustainable Credit Income Fund

* Refers to Cash/SRS option. ** refers to Cash/SRS/CPF option.

Selection criteria for ESG funds

Here are the fund weights and respective costs.

Fund weights for Endowus ESG Portfolios and associated costs

The funds themselves come with an expense ratio charged by the fund managers, but Endowus has managed to obtain either trailer fee-free share classes or 100% trailer fee rebates by fund managers.

The net TER is roughly 1% for a 100% equities allocation, exclusive of the advisory fee.

Investors can also opt to construct a portfolio in any combination of equities and bonds in this multi-asset, multi-manager portfolio on a spectrum that’s suitable for their risk appetite.

Endowus’ ESG portfolios are also diversified across a variety of countries and sectors as shown in the diagram below.

Looking at the funds’ historical performance, it seems like the 3-year annualised returns for the ESG equities have been superior compared to the benchmark. Last year (2020) was a superior year for many of the equities funds.

However, YTD performance for some equities funds have been underperforming the benchmark.

Are there additional fees to invest in Endowus ESG funds?

No. The all-in 0.4% (SRS) or 0.60% (Cash, tiered) on total assets under advised applies. However, ESG funds have a separate total expense ratio charged by the fund manager; of which Endowus applies a 100% trailer fee rebate to investors.

Getting started with Endowus ESG Portfolios

Add a new goal and select General Investing

Then select ESG.

Select your funding source, in my case, I am using Cash.

Review your risk tolerances and proposed plan

Below, you can find the constituents in your portfolio.

And historical performance of your portfolio.

The projected annualised rate of return is 7.43% for the 80/20 portfolio.

Click Confirm by SMS to confirm your portfolio and you will create the goal.

If you have idle funds, the your initial funding will be deployed from your cash funds.

Otherwise, if you want to make changes to your investment amount or add a new investment instruction, read on.

Head over to Invest / Redeem / Transfer then select Invest.

Select your newly created ESG portfolio and the funding source (Cash).

Enter the amount to invest – either recurring or one-time.


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