The Invesco ESG S&P Equal Weight Fund (RSPE) is just over two months old, making it one of the newer additions to the environmental, social, and governance (ESG) exchange traded funds landscape, but the rookie fund offers compelling characteristics for investors wanting ESG exposure.
RSPE, the ESG counterpart to the venerable Invesco S&P 500® Equal Weight ETF (RSP), arrives at a time of soaring demand for ESG products and investors wanting more than just basic approaches. By employing an equal-weight methodology, RSPE stands out from a crowded field of large-cap ESG funds that depend on market cap weighting.
“The notion that institutional and small investors can back companies that are socially responsible — or ensuring their bottom lines are safe from climate change — has been a boon for Wall Street and Silicon Valley,” reports Business Insider. “Investors are seeking out companies that they can feel good about backing, and employers see a strong environmental, social, and governance (ESG) awareness as part of a friendly public image.”
RSPE answers the ESG bell. The fund tracks the S&P 500 Equal Weight ESG Leaders Select Index. Components in that index are assigned ESG scores based on ability to capitalize on sustainability opportunities and deal with related challenges. The rigid requirements set forth by the S&P 500 Equal Weight ESG Leaders Select Index help RSPE avert some of the controversies surrounding greenwashing.
“Greenwashing — the act of making empty claims or over-promising about the benefits and characteristics of sustainability plans or investments — is a significant problem. And the very lack of standard ESG terminology is another issue the industry is working to address,” according to Business Insider.
Companies provide up to 1,000 data points to S&P, and from there, the index provider grades those firms based on a variety of ESG criteria. Many funds that compete with RSPE aren’t as data-dependent, indicating that despite its young age, RSPE is a credible idea for investors seeking robust ESG purity.
RSPE’s roster size is further confirmation that applying standards has a material impact. The ETF is home to 184 stocks, far fewer than the 500 in a traditional S&P 500 index fund. Additionally, RSPE could provide legitimate alpha-generating opportunities over time.
“The whole point is that the alpha is there. You seek alpha because our global economy is shifting such that the companies that are going to have the top performance will be those in the next three, five, 10 years that are bringing the low-carbon solutions,” Yana Kakar, veteran sustainability executive and CEO of Growth for Good Acquisition Corp., tells Business Insider.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.