In March, Dimensional Fund Advisors launched the Emerging Markets Sustainability Fund. This is a core (total market) fund holding the vast majority of companies within the (approximately) 20 eligible emerging markets countries. It replaces the Emerging Markets Core Fund as our default emerging markets exposure.
The fund employs similar sustainability screening that the existing DFA U.S. and International Sustainable Funds use, ranking thousands of companies by their sustainability score and owning more of the high ranking companies and less of the low ranking companies. In general, the carbon footprints of the companies owned by these funds is 70-80% lower than their respective benchmarks of all publicly traded companies, and the funds do not own any companies with substantial fossil fuel reserves. Abacus has three seats on the Sustainability Council of advisors who consult Dimensional Funds on the strategy and implementation of sustainability. The Sustainability Council was instrumental in setting this fund as a priority and helping Dimensional deliver it.
We have already replaced clients’ emerging markets exposure with the new sustainable fund in retirement accounts. Such accounts have no tax consequences resulting from investment changes. We have also made the switch in taxable accounts for which the tax impact was relatively minor. Abacus advisors will review and coordinate with clients on a case by case basis regarding positions where the tax impact could be material.
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