Environmental, social and governance, or ESG, investment principles have been gaining increased prominence in recent years with exchange traded funds providers helping increase ESG accessibility to all investors.
The SPDR MSCI ACWI Low Carbon Target ETF (NYSEArca: LOWC) and the iShares MSCI ACWI Low Carbon Target ETF (NYSEArca: CRBN) are two of the more successful ESG ETFs. CRBN and LOWC are up an average of 4.6% this year.
The two ETFs target the MSCI ACWI Low Carbon Target Index, which tries to address carbon exposure by overweighting companies with low carbon emissions relative to sales and per dollar of market capitalization, compared to the broader market. Both ETFs were created for the U.N. Joint Staff Pension Fund.
“The funds are part of a growing move to ESG investing, which stands for “environmental, social, and corporate governance.” Such investments are designed to favor companies with strong track records on ethical and sustainable issues. While the category has been growing in popularity, data remain mixed on whether scoring on such metrics is accurate and can lead to greater results over the long term,” reports Ryan Vlastelica for MarketWatch.
Investment pools that utilize SRI principles, which include ESG investments or simply sustainable investing, expanded to 925 in 2014 from 55 in 1995.
The socially responsible investing theme covers a wide range of investments. For instance, some funds shun the defense or fossil fuel industries while others exclude gun makers, alcohol or tobacco producers, or companies deemed unfriendly to their workers, shareholders or the environment.