As environmental, social, and governance (ESG) gains credibility as an investing style and as more market participants allocate capital to the related exchange traded funds, there’s increasing scrutiny around the ESG space.
With that scrutiny comes a need for clarity and more straightforward approaches to the benefits of ESG investing. Some ETFs answer that call. That group includes the IQ Candriam ESG US Equity ETF (IQSU).
“Other areas of sustainable investment that are the focus of a growing number of voluntary and formal industry and regulatory initiatives across regions include stewardship (voting and engagement), the implementation of exclusion policies, and thematic and impact investment,” according to BNP Paribas research. “As sustainable investment continues to mature, so will the comfort and means by which investors can ensure that there is something behind the curtain and that they are not being sold empty promises.”
The $380 million IQSU follows the IQ Candriam ESG US Equity Index and can be deployed as a core equity holding given its broad focus on domestic large-cap stocks. The fund holds 346 U.S. equities, giving it one of the deeper benches among domestic ESG ETFs. IQSU’s straightforward, no-nonsense approach to ESG allays concerns about greenwashing and the like – an important point in the current environment.
“Led by Europe, regulators around the world are sharpening their pencils on how to define, measure, oversee and enforce standards and disclosure linked to sustainable investment. So while navigating regulations from SFDR to MiFID II, CSRD or EU taxonomy can be challenging, the good news is that they are moving in the right direction, towards more harmonization of ESG integration, making data accessible and defining common measurement tools,” adds BNP Paribas.
IQSU could also find itself at the right place at the right time because ESG and decarbonization priorities are taking center stage among both corporations and governments, and that focus is international scale. It’s also going to require hefty spending, which could benefit a variety of IQSU member firms.
“Reflective of the scale of the capital reallocation required, Glasgow’s COP26 meeting helped to galvanize national and investor level commitments to achieve net zero carbon emissions by 2050. Today, some 450 financial institutions representing USD 130 trillion in assets under management and advice have committed to the Glasgow Financial Alliance for Net Zero (GFANZ),” concludes BNP Paribas.
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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.