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State Street Global Advisors (SSGA) has launched an international equities fund that screens out companies involved in tobacco and controversial weapons on the back of increasing demand.

The investment management arm of State Street Corporation said the fund was built for Australian institutional investors who were increasingly integrating environmental, social and governance (ESG) factors into their investment decisions.

SSGA head of portfolio strategies, Asia Pacific, Jonathan Shead, said: “For some years, a number of SSGA’s large Australian clients have chosen to exclude tobacco and weapons from their portfolios”.

But, investors were doing so through separate customised mandates which were expensive and only for the largest of investors, he said.

The State Street International Equities Index Trust ex-tobacco, ex-controversial weapons tracked the performance of the MSCI World ex-Australia ex-tobacco ex-controversial weapons index.

Medibank Private Limited provided $170 million of seed capital for the fund, SSGA said.

Medibank chief executive, Craig Drummond, said: “We’re proud to be investing in a tobacco-free portfolio. This decision is just good business sense”.

Medibank Private adopted a policy of not investing in tobacco companies in their $2.4 billion investment portfolio.

ESG assets under management were estimated to be over US$22 trillion, and were concentrated largely in North America, Northern Europe and Australia, SSGA said.

SSGA’s new fund had a minimum initial investment of $25,000.

MSCI also noted that investors were demanding more of these types of funds.

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