Parnassus Investments launches its first sustainable ETFs

Waste Management

12/12/2024 11:00

By Suzanne McGee
       Dec 12 (Reuters) - Parnassus, one of the largest asset
managers to offer products tied to environmental, social or
governance considerations, launched its first exchange-traded
funds on Thursday amid a difficult environment for the strategy.
    As performance of U.S. ESG funds lag broader indexes,
investor interest is shrinking. According to data from
Morningstar Inc.  MORN.O , the average U.S. ESG-focused ETF has
gained only 11% so far this year, compared to 27.6% for the
Standard & Poor's 500 index. The number of ESG funds in the U.S.
fell 8% in the first nine months of 2024 to only 595, with some
closing and others abandoning their ESG mandate. 
    Some segments are struggling more than others: Morningstar
reported last month that U.S. climate funds are likely to see
their first year of net outflows this year since it began
tracking them as a separate category in 2018.
    "Clearly the environment is not favorable to this type of
new offering, with closures exceeding launches," said Hortense
Bioy, London-based global director of sustainability research
for Morningstar. 
    But Benjamin Allen, CEO of Parnassus, says the 40-year-old
firm has ridden out other cycles and remains focused on picking
high-quality companies that also consider the impact of their
decisions on environmental and social issues on long-term
returns. According to the Parnassus website, comparable mutual
funds have posted gains of 17% to 22% so far this year. 
    "This is not virtue-signaling; this has a material impact on
returns," he told Reuters.
    Information on the holdings of the new ETFs, the Parnassus
Core Select ETF  PRCS.N  and the Parnassus Value Select ETF
 PRVS.N  will not be available until after their launch. Allen
said he expects there to be overlap between each ETF and similar
long-established mutual funds, although the ETFs will have no
more than 25 holdings.
    The $30 billion Parnassus Core Equity Fund mutual fund
includes positions in stocks like Nvidia  NVDA.O  and Microsoft
 MSFT.O , as well as Intercontinental Exchange  ICE.N  and Waste
Management  WM.N . The $5.1 billion Parnassus Value Equity Fund
owns stakes in Bank of America  BAC.N  and Deere & Co.  DE.N .
     

 (Reporting by Suzanne McGee, editing by Deepa Babington)
 ((Suzanne.McGee@thomsonreuters.com; 917-285-4385;))