ESG invests to collect more steam: ETFs up for grabs
The environmental, social and governance (ESG) investment category continues to remain one of the most popular areas among investors. In fact, Armando Senra, head of iShares Americas at BlackRock, said ESG investments could reach the $ 1,000 billion category by 2030, according to a CNBC article.
ESG funds have already recorded attractive inflows this year. About $ 21 billion was invested in the sustainable investment category in the first quarter of 2021 alone. Therefore, there is ample scope for the number to grow further and compares favorably with the above amount of $ 51 billion invested. in ESG funds in 2020, $ 21.4 billion in 2019 and $ 5.4 billion in inflows in 2018, as mentioned in a CNBC article.
In particular, the alternative energy space is expected to strengthen under the Biden administration. President Joe Biden is expected to speak out on climate emergency on global platforms and ensure that the United States achieves 100% clean energy savings and net zero emissions, at least by 2050. In addition, he pledged to halve US greenhouse gas emissions by 2030 as reported in a Yahoo Finance article.
Experts believe Biden’s climate program will likely be a “boon for ESG investors,” according to a CNBC article. Additionally, Biden’s $ 2.3 trillion infrastructure plan presented in March, containing initiatives to control climate change, can provide a huge boost to the ESG space. The plan commits to “igniting the electric vehicle revolution” by building a network of 500,000 electric vehicle chargers by 2030, replacing 50,000 diesel transit vehicles and electrifying around 20% of school buses, among other initiatives. Notably, Mark Mathers, certified financial planner and partner at Beacon Pointe Advisors in Boston, also said that “Biden’s influence here is going to be helpful,” as stated in a CNBC article.
Subsequently, the coronavirus pandemic impacted the investment world, with market participants showing greater interest in conscious investing, thus boosting demand for ESG funds. Not only the fear of COVID-19, but other factors like protests against racism, geopolitical tensions and changing climatic conditions are also responsible for the growing popularity of sustainable investment funds. Riding on this strong demand, ESG funds are posting record inflows this year. Notably, ESG investments have shown a certain resilience and continue to attract the attention of investors amid the pandemic.
Notably, David Bailin, chief investment officer at Citi Global Wealth, noted that in particular, young investors are expected to place “a huge emphasis” on the category of sustainable and responsible investing over the next five to 10 years. years (as reported in a CNBC article).
Featured ESG ETFs
ESG investing should continue to increase investor optimism. Below we discuss a few ETFs that aim to provide exposure to ESG investments:
IShares ESG Aware MSCI USA ETF ESGU
The fund seeks a risk and return similar to the MSCI USA Extended ESG Focus Index while achieving more sustainable results. It provides exposure to higher-rated ESG companies while accessing large and mid-cap US equities. The fund charges 15 basis points in fees (read: Thematic investing ideas for increasing your portfolio returns in the second quarter).
Xtrackers MSCI USA ESG Leaders Equity ETF USSG
The fund replicates investment results which generally correspond to the performance of the MSCI USA ESG Leaders Index. In particular, the MSCI USA ESG Leaders Index offers exposure to companies showing high ESG performance compared to their peers in the sector. The fund charges 10 basis points in fees (read: ETF ESG (USSG) hits new 52-week high).
Vanguard ESG U.S. Equity ETF ESGV
The fund replicates the performance of the FTSE US All Cap Choice index composed of large, mid and small capitalization stocks. It does not include companies operating in the sectors of adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling and nuclear energy. It also does not take into account companies that do not respect the principles of the United Nations Global Compact and the criteria of diversity. It charges 12 basis points for fees (read: 5 ETFs to improve your portfolio in 2021).
Nuveen ESG Large Cap Growth ETF NULG
The underlying TIAA ESG USA Large-Cap Growth index comprises large cap equity securities and meets ESG criteria and exhibits overall growth style characteristics based on the long-term growth rate of EPS, the rate of growth Long-term historical growth trend in EPS and long-term historical growth trend in sales per share. It charges 35 basis points in fees (read: 4 factors ESG ETFs are likely to soar in Q2).
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Nuveen ESG LargeCap Growth ETF (NULG): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
Vanguard ESG US Stock ETF (ESGV): ETF Research Reports
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.