Third-party ESG ratings added to growing list
of ESG resources and investment choices
Charles Schwab today announced that it has begun providing
clients with access to MSCI’s Environmental, Social, and Governance
(ESG) Ratings for individual securities. The ratings are now
available to clients through the Research tool on Schwab.com or by
viewing the stock’s Schwab Equity Ratings® Report.
“A growing number of people want to align their investments with
their beliefs and values,” said Malik Sievers, Head of ESG
Strategy, Schwab Asset Management™. “Having an easy way to review a
company’s ESG rating during the research process is something
today’s investors find useful as they seek to integrate ESG in
their portfolios and evaluate a company’s resilience to ESG
An MSCI ESG Rating is designed to measure a company’s resilience
to long-term industry material ESG risks. MSCI rates over 8,500
companies (14,000 issuers including subsidiaries). The ratings
model uses a rules-based methodology to identify industry leaders
and laggards according to their exposure to financially relevant
ESG risks and how well they manage those risks relative to peers.
Companies are rated on a AAA to CCC scale relative to the standards
and performance of their industry peers.
“An ESG rating measures a company’s exposure to long-term
environmental, social, and governance risks, but they are often not
highlighted in traditional financial reviews. Investors can use ESG
ratings to supplement financial analyses and gain a broader view of
a company’s long-term potential,” said Sievers.
According to Schwab’s Q1 2022 Retail Client Sentiment Report,
nearly a quarter of clients said they make investing decisions
today in accordance with their values or areas of interest and
another one in five say they would like to invest more closely
based on personal values or interests.
This new feature is the latest example of Schwab’s overall
commitment to help clients personalize their investment portfolios
and invest based on their specific objectives. Schwab recently
introduced a number of products and services designed to help
clients personalize how they invest, whether it’s specific to ESG
investments or giving clients the ability to build their portfolio
based on their personal preferences:
- In November 2021, Schwab Asset Management launched the Schwab
Ariel ESG ETF, followed shortly by making two positive impact
Wasmer Schroeder Strategies available to Schwab clients.
- In March, Schwab announced the launch of thematic stock lists,
a new resource designed for self-directed investors who want to
invest in stocks aligned with their personal interests and
- Earlier this month, Schwab introduced Schwab Personalized
Indexing™, a new direct indexing solution that offers powerful tax
management and portfolio management capabilities to people who want
to personalize their investments to fit their circumstances and
- Schwab also provides access to hundreds of third-party ESG
products, in addition to education and screening tools, including
product lists to help clients explore the ESG universe.
Schwab also created an Environmental, Social, and Governance
(ESG) Investing hub to centralize information on ESG strategies,
ESG options at Schwab, and timely insights.
About Charles Schwab
At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at www.aboutschwab.com. Follow us
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The Schwab Ariel ESG ETF is different from traditional
Traditional ETFs tell the public what assets they hold each day.
This fund will not. This may create additional risks for
your investment. For example:
- You may have to pay more money to trade the fund’s shares. This
fund will provide less information to traders, who tend to charge
more for trades when they have less information.
- The price you pay to buy fund shares on an exchange may not
match the value of the fund’s portfolio. The same is true when you
sell shares. These price differences may be greater for this fund
compared to other ETFs because it provides less information to
- These additional risks may be even greater in bad or uncertain
- The ETF will publish on its website each day a “Proxy
Portfolio” designed to help trading in shares of the ETF. While the
Proxy Portfolio includes some of the ETF’s holdings, it is not the
ETF’s actual portfolio.
The differences between this fund and other ETFs may also have
advantages. By keeping certain information about the fund secret,
this fund may face less risk that other traders can predict or copy
its investment strategy. This may improve the fund’s performance.
If other traders are able to copy or predict the fund’s investment
strategy, however, this may hurt the fund’s performance.
For additional information regarding the unique attributes and
risks of the fund, see Proxy Portfolio Risk, Premium/Discount Risk,
Trading Halt Risk, Authorized Participant Concentration Risk,
Tracking Error Risk and Shares of the Fund May Trade at Prices
Other Than NAV in the Principal Risks and Proxy Portfolio and Proxy
Overlap sections of the prospectus and/or the Statement of
Investors should consider carefully information contained in
the prospectus, or if available, the summary prospectus, including
investment objectives, risks, charges and expenses. You can obtain
a prospectus, or if available, a summary prospectus by visiting
Please read it carefully before investing.
Investment returns will fluctuate and are subject to market
volatility, so that an investor’s shares, when redeemed or sold,
may be worth more or less than their original cost. Unlike mutual
funds, shares of ETFs are not individually redeemable directly with
the ETF. Shares of ETFs are bought and sold at market price, which
may be higher or lower than the net asset value (NAV).
Active Semi-Transparent (also known as Non-Transparent) ETF
Risk: Active semi-transparent ETFs operate differently from
other exchange-traded funds (ETFs). Unlike other ETFs, an active
semi-transparent ETF does not publicly disclose its entire
portfolio composition each business day, which may affect the price
at which shares of the ETF trade in the secondary market. Active
semi-transparent ETFs have limited public trading history. There
can be no assurance that an active trading market will develop, be
maintained or operate as intended. There is a risk that the market
price of an active semi-transparent ETF may vary significantly from
the ETF’s net asset value and that its shares may trade at a wider
bid/ask spread and, therefore, cost investors more to trade than
shares of other ETFs. These risks are heightened during periods of
market disruption or volatility.
Proxy Portfolio Risk: Unlike traditional ETFs, this fund
does not disclose its portfolio holdings (Actual Portfolio) daily.
The fund instead posts a Proxy Portfolio on its website each day.
The Proxy Portfolio is designed to reflect the economic exposures
and risk characteristics of the fund’s actual holdings on each
trading day, but it is not the same as the fund’s Actual Portfolio.
Although the Proxy Portfolio is intended to provide investors with
enough information to allow for an effective arbitrage mechanism
that will keep the market price of the Fund at or close to the
underlying NAV per Share of the Fund, there is a risk (which may
increase during periods of market disruption or volatility) that
market prices will vary significantly from the underlying NAV of
the fund. ETF trading on the basis of a published Proxy Portfolio
may trade at a wider bid/ask spread than ETFs that publish their
portfolios on a daily basis, especially during periods of market
disruption or volatility, and therefore may cost investors more to
trade. Also, while the Fund seeks to benefit from keeping its
portfolio information secret, market participants may attempt to
use the Proxy Portfolio to identify a Fund’s trading strategy,
which if successful, could result in such market participants
engaging in certain predatory trading practices that may have the
potential to harm the Fund and its shareholders.
Proxy Portfolio Construction – The Proxy Portfolio is
designed to recreate the daily performance of the Actual Portfolio.
This is achieved by performing a “Factor Model” analysis of the
Actual Portfolio. The Factor Model is comprised of three sets of
factors or analytical metrics: market-based factors, fundamental
factors, and industry/sector factors. The fund uses a “Model
Universe” to generate its Proxy Portfolio. The Model Universe is
comprised of securities that the fund can purchase and will be a
financial index or stated portfolio of securities from which fund
investments will be selected. The results of the Factor Model
analysis are then applied to the Model Universe. The Proxy
Portfolio is then generated as a result of this Model Universe
analysis with the Proxy Portfolio being a small sub-set of the
Model Universe. The Factor Model is applied to both the Actual
Portfolio and the Model Universe to construct the fund’s Proxy
Portfolio that performs in a manner substantially identical to the
performance of its Actual Portfolio.
The Proxy Portfolio will only include investments the fund is
permitted to hold. The fund’s SAI contains more information on the
Proxy Portfolio and its construction. Proxy Portfolio and Proxy
Overlap Information regarding the contents of the Proxy Portfolio,
and the percentage weight overlap between the holdings of the Proxy
Portfolio and a Fund’s Actual Portfolio holdings that formed the
basis for its calculation of NAV at the end of the prior Business
Day (the Portfolio Overlap), is available by visiting the fund’s
Thematic stock lists are not intended to be investment advice or
a recommendation of any stock. Investing in stocks can be volatile
and involves risk, including loss of principal. Consider your
individual circumstances prior to investing.
Environmental, social and governance (ESG) strategies
implemented by mutual funds, exchange-traded funds (ETFs), and
separately managed accounts are currently subject to inconsistent
industry definitions and standards for the measurement and
evaluation of ESG factors; therefore, such factors may differ
significantly across strategies. As a result, it may be difficult
to compare ESG investment products. An investment product’s ESG
strategy may significantly influence its performance. Carefully
review an investment product’s prospectus or disclosure brochure to
learn more about how it incorporates ESG factors into its
Please refer to the Charles Schwab Investment Management,
Inc. Disclosure Brochure for additional information.
Portfolio Management for Schwab Personalized Indexing is
provided by Charles Schwab Investment Management, Inc., dba Schwab
Asset Management, a registered investment adviser and an affiliate
of Charles Schwab & Co., Inc. ("Schwab"). Both Schwab Asset
Management and Schwab are separate entities and subsidiaries of The
Charles Schwab Corporation.
As of July 1, 2020, the portfolio management teams for the
Wasmer Schroeder Strategies transitioned to Schwab Asset Management
with Schwab Asset Management assuming portfolio management services
for the Strategies. Schwab Asset Management is a registered
investment adviser and an affiliate of Charles Schwab & Co.,
Inc. (“Schwab”). Both Schwab Asset Management and Schwab are
separate entities and subsidiaries of The Charles Schwab
Corporation. Wasmer Schroeder Strategies are available through
Schwab's Managed Account Connection® program ("Connection"). Please
read Schwab's disclosure brochure for important information and
disclosures relating to Connection and Schwab's Managed Account
Schwab Asset Management™ is the dba name for Charles Schwab
Investment Management, Inc. (CSIM), the investment adviser for
Schwab Funds, Schwab ETFs, and separately managed account
strategies. Schwab Funds are distributed by Charles Schwab &
Co., Inc. (Schwab), Member SIPC. Schwab ETFs are distributed by SEI
Investments Distribution Co. (SIDCO). Schwab Asset Management and
Schwab are separate but affiliated companies and subsidiaries of
The Charles Schwab Corporation and are not affiliated with
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Meredith Richard Charles Schwab 646-343-7419
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