On the surface, healthcare appears to be a sector with obvious environmental, social, and governance (ESG) credentials, meaning it’s not surprising the group is prominent in an array of ESG exchange traded funds.
However, healthcare isn’t “ESG perfect.” No sector is, but healthcare has some unique ESG issues. Investors can avoid those potential headwinds with the right ETFs with the IQ Healthy Hearts ETF (HART) standing tall among the options.
HART, which tracks the IQ Candriam Healthy Hearts Index, has ESG leanings, but not in the strictest, most conventional sense of that investing style. Rather, HART’s issuer makes contributions to the American Heart Association’s Social Impact Fund. That dedicated focus helps HART avoid potentially thorny ESG issues.
“The nature of healthcare poses unique ESG risks in terms of community impact and involvement, retention in the workforce, and environmentally friendly buildings and medical supplies. As ESG concerns continue to become more important to investors and acquirors — and as government regulations increasingly necessitate movements towards ESG-friendly business practices — both for-profit and non-profit entities in the healthcare industry need to ensure that proper ESG standards are maintained,” according to JD Supra.
What makes HART a potentially attractive option for virtuous investors seeking sector exposure is the aforementioned mission of the ETF. The fund’s underlying index focuses on companies from healthcare and other sectors that are engaged in the fight against heart disease.
That might not check the box as an overt environmental strategy and it probably doesn’t fit the bill as a dedicated governance strategy, but a strong case can be made HART has legitimate social good credentials.
One way of looking at HART’s methodology is that it’s actually ahead of the times when it comes to the intersection of ESG and the healthcare sector because more companies in the group need to be more “involved in the communities that the healthcare operations serve, leading and sponsoring community activities, creating a foundation to demonstrate a charitable corporate character, and participating in community celebrations of diversity,” added JD Supra.
Some of the other ways healthcare companies can improve ESG credentials is by better harnessing technology to protect patient data and improve efficiencies. Unlike many of its traditional peers, HART is up to that task because it also features exposure to communication services and technology stocks.
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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.