Investors love the exchange traded fund structure, and they also love low fees on their ETFs. Many of those market participants are also embracing environmental, social, and governance (ESG) strategies.
It’s common for ESG ETFs to sport higher expense ratios than pure vanilla equity counterparts, but there are ETF avenues for ESG investors to have their cake and eat it too. Consider the IQ Candriam ESG US Equity ETF (IQSU).
IQSU, which tracks the IQ Candriam ESG US Equity Index, charges just 0.09% per year, or $9 on a $10,000 investment. That’s inexpensive among broad-based large-cap domestic equity ETFs, ESG or otherwise. Good deals on fees, regardless of underlying investment strategy, are always a treat for investors, but more important than that is the ETF’s relevance and long-term potential.
IQSU checks those boxes, indicating that it can serve as a core large-cap alternative just as more investors are embracing ESG and climate-aware strategies.
“Physical risks often refer to vulnerability in a company’s supply chain due to increasing frequency of extreme weather events such as flooding or hurricanes,” noted Morningstar analyst Alyssa Stankiewicz. “Opportunities exist, too. Through their portfolios, investors can gain exposure to companies developing innovative solutions to mitigate climate change, such as carbon capture technologies, or to adapt to the impacts of climate change.”
Underweight to potential climate offenders such as the energy and utilities sectors, IQSU offers investors some avenues to participate in the fight against climate change. Predictably, technology is a significant part of that endeavor, and IQSU is significantly overweight to that group with a 36.6% allocation, according to issuer data.
IQSU, which holds 355 stocks, is also relevant at a time when many experts are arguing that rapid action — meaning substantial near-term spending — is needed to reduce carbon emissions and to meet various climate goals.
“In its latest report, the Intergovernmental Panel on Climate Change warned that the window of opportunity to take any meaningful climate action is rapidly closing. Ultimately, global cooperation between governments is required to address the full scope of this threat, but the private sector and individual investors can be part of the transition, too,” added Morningstar’s Stankiewicz.
To the point about good deals, IQSU may be offering that in another form. The fund is growth-heavy, and with growth and tech stocks out of favor, valuations on many IQSU components are more attractive today than they were last year.
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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.