FlexShares STOXX Global ESG Select Index Fund (ESGG) seeks to track the STOXX Global ESG Select Index, which measures the performance of developed and emerging market companies that demonstrate strong environmental, social, and governance practices while maintaining sector diversification across global equity markets.
How It Works
ESGG uses a passively managed, market-capitalization-weighted approach that screens companies based on ESG scores from Sustainalytics, excluding those involved in controversial business activities like tobacco, weapons, or thermal coal. The fund maintains sector neutrality by ensuring ESG leaders are represented across all major industry groups. Rebalancing occurs semi-annually to reflect index changes and maintain ESG criteria compliance while preserving broad global equity exposure.
Key Features
- Combines ESG screening with sector neutrality, avoiding the technology bias common in many ESG funds
- Covers both developed and emerging markets for comprehensive global ESG equity exposure in one fund
- Zero expense ratio makes it one of the most cost-effective ESG investing options available
Risks
- This ETF can lose value if ESG-focused companies underperform traditional benchmarks during market rotations favoring value or cyclical sectors
- ESG screening excludes entire industries like energy and defense, creating sector concentration risk during commodity or geopolitical cycles
- Global equity exposure means losses during worldwide market downturns, potentially declining 40-50% in severe bear markets like 2008-2009
Who Should Own This
Best suited as a core ESG holding (20-40% of equity allocation) for socially conscious investors with 5+ year time horizons seeking global diversification. Medium-to-high risk tolerance required due to equity volatility and ESG factor risk. Ideal for investors prioritizing sustainable investing without sacrificing broad market exposure.