“ESG provides broad investor appeal and is a solid way to invest and gain increased risk-adjusted returns,” Dzanis said.
For example, joining the new wave of ETF products based on ESG principles, FlexShares has come out with the FlexShares STOXX US ESG Impact Index Fund (NasdaqGM: ESG) and FlexShares STOXX Global ESG Impact Index Fund (NasdaqGM: ESGG).
The funds are based on the STOXX global ESG Impact Index, which screens companies scoring better with respect to a select set of ESG key performance indicators (KPIs), with the bottom 50% of such companies based on their ESG KPI scores excluded from the Index, as are companies that do not adhere to the UN Global compact principles, are involved in controversial weapons or are coal miners.
“KPI integration improves bottoms-up security selection while removing data-provider bias,” according to FlexShares. “The methodology builds an ESG index by essentially coding at the ‘root’ level versus applying an overlay or top-down ESG strategy; it parallels the best behaviors of portfolio managers when it comes to evaluating, sorting and selecting companies for investment.”
For more information on the ESG theme, visit our socially responsible ETFs category.