What is SUSL? (Pros, Cons, and Strategies)

As sustainability becomes an increasingly important factor in investment decisions, the focus on ESG (Environmental, Social, and Governance) criteria has gained significant traction. One such ETF that aligns with these values is the iShares ESG MSCI USA Leaders ETF, commonly known by its ticker symbol, SUSL. This blog post explores what SUSL is, along with its advantages and disadvantages, and how it can be strategically employed in a diversified investment portfolio.

What is SUSL?

SUSL stands for iShares ESG MSCI USA Leaders ETF. As an ESG-focused investment vehicle, SUSL aims to provide exposure to U.S. companies demonstrating strong environmental, social, and governance practices.

SUSL tracks the MSCI USA Extended ESG Leaders Index, which selects companies exhibiting superior ESG performance relative to their sector peers. This approach emphasizes sustainability while still offering broad market exposure.

Key Features of SUSL

• ESG Integration: Companies are selected based on their performance in environmental stewardship, social responsibility, and governance practices.
• Market Capitalization: Typically includes large-cap and mid-cap U.S. companies to ensure market stability.
• Sector Diversification: Though focused on sustainability, SUSL maintains diversified exposure across various sectors, reducing the risk associated with sector-specific downturns.

The selection methodology involves rigorous screening processes, ensuring that companies not only meet general ESG criteria but also excel in each category. This thorough vetting makes SUSL a compelling choice for socially conscious investors.

SUSL Composition

SUSL includes well-regarded corporations like Microsoft (MSFT), Google (GOOGL), and Procter & Gamble (PG). These companies are known for their commitment to minimizing environmental impact, promoting social equity, and maintaining strong governance structures. Meanwhile, sectors that are often associated with poor ESG performance, such as coal and tobacco, are underrepresented or entirely excluded.

Pros of SUSL

Alignment with ESG Principles

One major advantage of SUSL is its alignment with ESG principles. By investing in this ETF, you’re not only pursuing potential financial returns but also contributing to a more sustainable and equitable world. Over recent years, there has been growing evidence that companies with strong ESG profiles tend to be better managed and more resilient to volatility.

Strong Long-term Performance

SUSL typically focuses on companies with strong ESG profiles, which have been shown to be more resilient during economic downturns. These companies often demonstrate robust risk management, innovation, and brand loyalty, contributing to stable and promising long-term performance.

Diversified Holdings

Though ESG-focused, SUSL does not compromise on sector diversification. This helps manage risk by distributing investments across various industries, such as technology, healthcare, consumer goods, and financials.

Low Expense Ratio

SUSL comes with a modest expense ratio of 0.15%, making it an attractive option for long-term investors looking to keep investment costs low. The minimal fees contribute to the growth of net returns over time, boosting overall portfolio performance.

Cons of SUSL

Limited Dividend Yield

Compared to traditional dividend ETFs, SUSL has a relatively low dividend yield, often ranging between 1.5% to 2%. This may not be appealing to income-focused investors seeking substantial dividend payouts.

ESG Criteria Limitations

While adhering to ESG criteria is beneficial for sustainability, it also limits the universe of companies available for investment. This exclusion could result in missed opportunities in high-growth sectors or undervalued stocks that don't meet stringent ESG benchmarks.

Market Performance Variability

While ESG-focused companies generally perform well over the long term, the adherence to non-financial metrics could result in varying short-term performance compared to broader market indices. This variability might not appeal to all investors.

SUSL Investment Strategies

Investing in SUSL requires thoughtful consideration of your long-term goals, risk tolerance, and commitment to sustainability. Below are several strategic approaches that can be employed.

Long-term Investment Strategy

For investors with a long-term horizon, SUSL offers an opportunity to grow wealth while adhering to personal values around sustainability. As the focus on ESG continues to grow, companies within SUSL are likely to benefit from increased investor interest and better management practices, which can result in robust financial performance.

A long-term commitment to SUSL can offer the twin benefits of market returns and positive impact, making it ideal for retirement planning or education funds.

Balanced Portfolio Approach

Combining SUSL with other ETFs can provide a balanced portfolio that captures various aspects of market performance. For instance, pairing SUSL with ETFs focusing on small-cap stocks, bonds, or international markets can enhance overall portfolio diversification while maintaining an ESG focus.

Thematic Investment Strategy

If you are keen on specific ESG themes like renewable energy, social justice, or corporate governance, SUSL can serve as the core holding with thematic ETFs complementing it. This way, you can align your portfolio closely with your specific interests and values.

Regular Investment and Rebalancing

By regularly investing a fixed amount in SUSL and periodically rebalancing your portfolio, you can average out entry costs and maintain the desired asset allocation. This dollar-cost averaging strategy is particularly effective for reducing the impact of market volatility over time.

Conclusion

SUSL stands out as a sustainable investment option, integrating ESG principles with diversified market exposure. While it may not offer high dividend yields or include high-growth tech stocks, it provides a compelling blend of ethical investing and reliable performance. Whether you're preparing for retirement, seeking long-term growth, or aiming to build a balanced portfolio, SUSL offers numerous advantages for the conscientious investor.