Google Invests in Financial Services Sector With CME

The companies are embarking on a 10-year partnership that will see Google Cloud powering the exchange that has trillions of dollars trading daily, allowing for a more streamlined approach for new users and creating new artificial intelligence technology to monitor market risk, among other roles that the cloud provider will assist CME with regarding the exchange.

At a market cap that exceeds $79 billion, CME has become the most valued exchange operator globally and is a huge win to gain as a client for Google. The financial services sector has been notoriously slow to adopt cloud technology, partially because of the regulations and oversight of the banks and exchanges that operate within the sector, and partially because of security concerns.

The $1 billion investment made by Google was an equity investment in nonvoting shares of convertible, preferred stock and is the single largest transaction that Google has ever made into the industry. Google Cloud chief executive Thomas Kurian said the investment was “a reflection of our commitment to the transformation of the financial system, not just to one company’s infrastructure.”

The transition to the cloud will not be an easy one and comes with a lot of pressures as exchanges transact in trades, price quotes, and sometimes orders in millionths of a second from high-speed trading firms. In addition, steps must be taken to ensure that the system has stability on the cloud, as any outage could have major impacts on the entirety of the financial markets.

“I wanted to be under a technology umbrella that has the bandwidth to allow me to grow my business,” CME chairman and chief executive Terrence Duffy said in an interview with the WSJ. “I’m good at transactional businesses, myself and my team. Google is really good at technology. I think it’s a marriage made in heaven.”

The American Century Sustainable Equity ETF (ESGA C+) invests in U.S. large-cap companies with large growth and value potential that rank highly on ESG metrics, such as Alphabet, Google’s parent company. The fund measures the ESG performance of a company, weighing environmental impact as one of the major factors for qualification. It goes a step beyond, though, and it also looks at the other aspects of ESG, such as turnover of employees and corporate leadership, to name just a few.

ACI’s proprietary model assigns a score to each security for financial metrics and a separate score for ESG metrics, then combines them for an overall score.

The highest-scoring securities are selected within each sector, creating a portfolio with strong performance and higher ESG ratings than the stocks in the S&P 500 Index.

The fund is a semi-transparent ETF, meaning that allocations are disclosed on a quarterly basis, not daily. As of its last disclosure, ESGA held companies like Alphabet (GOOGL), Home Depot (HD), and Microsoft (MSFT).

ESGA has a total annual fund operating expense of 0.39% and total assets of $158 million.

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