Two ETFs offered by Columbia Threadneedle Investments — including one that’s on the Texas comptroller’s list of funds subject to divestment provisions — will each be renamed to exclude three letters: ESG.
The board of trustees of the Columbia U.S. ESG Equity Income ETF and the Columbia International ESG Equity Income ETF approved changes to each ETF’s name, investment objective and principal investment strategies effective on or about June 1, a March 18 prospectus supplement filed with the Securities and Exchange Commission said.
ESG is short for environmental, social and governance.
In an August 2022 news release announcing his list of financial companies that boycott energy companies, Texas Comptroller Glenn Hegar said the ESG movement has produced a “perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy.”
Listed companies are subject to divestment provisions outlined in Texas Government Code Chapter 809, the release said. The comptroller’s initial list included 10 financial companies, which also said that comptroller staff had researched individual investment funds, generating a list of nearly 350 funds subject to the same provisions.
State governmental entities subject to the investment prohibitions and divestment requirements include the $187.1 billion Texas Teacher Retirement System and the $36.2 billion Texas Employees Retirement System.
The fund list, as of October 2023, included the Columbia U.S. ESG Equity Income ETF. That fund, which currently has the ticker symbol ESGS, on the effective date will have its name changed to the Columbia U.S. Equity Income ETF and its ticker changed to EQIN, the March 18 SEC filing said.
The Columbia U.S. ESG Equity Income ETF had Exxon Mobil Corp. as its top holding as of March 20, according to Columbia Threadneedle’s website.
The Columbia International ESG Equity Income ETF, currently known by the ticker ESGN, will have its name changed to the Columbia International Equity Income ETF and its ticker changed to INEQ, according to the filing.
The Columbia U.S. ESG Equity Income ETF had assets totaling $57 million as of March 20, while the Columbia International ESG Equity Income ETF had assets of $7.6 million, according to Morningstar’s website.
In addition to the name and ticker changes, the ETFs, which currently track indexes, will become actively managed ETFs that seek total return, a Columbia Threadneedle spokesperson said.
The changes are designed to give investors “opportunities for total return by retaining the funds’ rules-based and systematic approach while adding discretionary oversight to the individual portfolio holdings,” the spokesperson said.
With industry and investor attitudes toward the ESG label continuing to evolve, the firm decided to remove the term ESG from the ETFs’ names because while the funds will continue to use Columbia Threadneedle’s ESG materiality ratings in portfolio construction, “our ESG research is just but one of the tools incorporated into the portfolio construction of the ETFs,” she said.
The inclusion of ESGS on the comptroller’s fund list did not enter into the decision to delete ESG from its name, the spokesperson said.
Columbia Threadneedle, the global asset management group of Ameriprise Financial, managed assets totaling $637 billion as of Dec. 31.
