ESG Risks: What Today’s Advisor Needs to Know | ETF Trends

As a financial advisor, what’s your positioning for ESG allocation for your clients? The current crop of funds isn’t just about appealing to one’s conscience; the data clearly show that there are concrete ESG-related risks that may hurt some companies while benefiting others. With so many clients asking for ESG strategies, advisors sometimes overlook these possibilities.

In the upcoming webcast, ESG Risks: What Today’s Advisor Needs To Know, American Century Investments’ Joe Reiland, vice president, senior portfolio manager; and Rene Casis, vice president, ETF portfolio manager, will take a deep dive discussion of the ESG factors that could impact your clients’ portfolios.

For example, the American Century Sustainable Growth ETF (ESGY) is one answer that investors can turn to. Put simply, companies residing in ESGY have clear sustainability goals and work to enhance or exceed social and governance objectives. How the actively managed fund’s roster is constructed is relevant to investors at a time when ESG ratings and scoring are under the microscope.

ESGY combines quantitative and fundamental research from multiple sources to ensure exposure to companies with more attractive ESG characteristics. The strategy utilizes a dynamic risk-management process focused on understanding and quantifying all portfolio risks. Overall, ESGY is a solid idea for advisors and investors looking to demystify ESG principles while employing a growth-heavy approach to sustainability. Those characteristics could prove attractive over the long haul.

Additionally, the American Century Sustainable Equity ETF (ESGA) could eventually grow into an investor favorite in the ESG ETF space because of its actively managed nature. That management style could be a benefit to investors as issues such as greenwashing and ESG scoring remain prominent in this part of the fund landscape. As an active fund, ESGA can focus on legitimate ESG opportunities while avoiding companies with flimsy ESG credentials.

ACI’s proprietary model assigns a score to each security for financial metrics and a separate score for ESG metrics, then combines them for an overall score. The highest-scoring securities are selected within each sector, creating a portfolio with strong performance and higher ESG ratings than the stocks in the S&P 500 Index.

Financial advisors who are interested in learning more about ESG investments can register for the Tuesday, March 8 webcast here.