ESG ETFs Help Investment Portfolio's Conform to Investors' Attitudes

As many seek to diversify their equity portfolios, consider a sustainable investing exchange traded fund strategy that locks on the potential benefits of environmental, social and governance, or ESG, principles.

On the recent webcast (CE Credit available on-demand), The Untapped Potential of ESG Investing, Sharon French, Head of Beta Solutions at OppenheimerFunds, explained that there is growing demand for ESG investments in response to rising standards for corporate business practices, demographic shifts and investing preferences, regulatory and policy developments, global sustainability challenges, and greater accessibility and proliferation of ESG data.

Meanwhile, French mentioned that corporate business practices are changing as well to meet the shifting demand for more socially responsible investments. For example, more companies are reporting impact investing and social responsibility data as there is a growing body of research on the potential impact of ESG investing.

Among the various investor groups, the rising affluent millennial investor are showing a significant change in investment behavior, compared to their older counterparts. French pointed out that millennials are more likely to be interested in responsible investing than other generations, indicated they would like to work for an employer that makes a positive social impact and like investments with competitive returns that also promote positive social and environmental outcomes.

Financial advisors will undoubtedly be closely monitoring this rising group of investors as $30 trillion in wealth is expected to transfer from the Baby Boomer generation to their heirs.

“It’s important to recognize the critical role that Affluent Millennials will play,” French said. “They will eventually be put in charge of the family portfolios. Many of them plan to increase their allocations towards impact investing, which looks to provide societal or environmental benefits in addition to sustainable investment returns.”

Matthew C. Straut, Head of Registered Investment Advisor Channel at OppenheimerFunds, also argued that the millennial investor may have a much different investment mindset to older generations. For example, millennials are more likely to pull money away from companies that use animal testing, use tax minimization schemes and are in the news for wrong reasons. In contrast, those aged 36 or older are more likely to pull money away from companies linked to repressive regimes and associated with the pron/sex industry.