Microsoft Stands Head and Shoulders Above the Rest in ESG

In the world of environmental, social, and governance-oriented (ESG) funds, it’s tech giant Microsoft that stands head and shoulders above the rest, according to financial data company EPFR. Microsoft has been a prime beneficiary as more investors emphasize climate and social concerns.

Per a Quartz report, “ESG funds held $2.3 billion worth of Microsoft stock as of Dec. 31, according to EPFR data. Alphabet and Disney came in at No. 2 and 3. The EPFR data accounts for all equity funds (active as well as passive index funds) around the world. Funds with higher ESG and socially responsible investing (SRI) ratings have been screened, often by an index or rating company, to try and make sure they meet certain criteria for positive social or climate-related attribute.”

“In pretty much every client meeting at the moment, we wind up having an SRI/ESG conversation,” said Cameron Brandt, director of research at EPFR. These types of funds “are soaking up the cash,” he said. “The caveat is that we are seeing a lot of funds start to talk the talk without walking the walk.”

ESG ETF Explosion

In the ETF space, the number of ESG funds just keeps on growing. Based on a CNBC report, recent data from ETFGI showed that “ESG ETFs represented $52 billion of the $6 trillion global assets under management (AUM) of the ETF market.”

Additionally, data suggests that the trend to ESG is not a flash in the pan.

“However, the 2020 Global ETF Investor Survey from U.S. private bank Brown Brothers Harriman (BBH) estimated that nearly 74% of global investors plan to increase their ESG ETF allocation over the next year. In five years, almost one in five investors said they would allocate between 21% and 50% of their portfolio to ESG funds, and BBH concluded that ESG “doesn’t appear to be a ‘passing fad,’ the report added.

Because of the number of new green bonds, fixed income ETFs are also benefitting.

“Since first appearing in 2007, the market for green bonds has attracted significant interest in recent years as sustainability issues rise up the corporate agenda, following pressure for companies to reduce their environmental impact, and following the introduction of increased regulation in the area,” Linklaters capital markets lawyer Amrita Ahluwalia said.

An ETF to consider for ESG exposure is the MSCI ACWI ex USA ESG Leaders Equity ETF (NYSEArca: ACSG). ACSG seeks investment results that correspond generally to the performance of the MSCI ACWI ex USA ESG Leaders Index , which is a capitalization weighted index that provides exposure to companies with high ESG performance relative to their sector peers.

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