There are some inevitabilities regarding environmental, social, and governance (ESG) investing, including that debate will continue being directed at this style and that growth is likely to do the same. While the ride won’t always be free of bumps, the future is mostly bright for ESG exchange traded funds, particularly those with the right ingredients such as easy-to-understand strategies and favorable fees. The IQ Candriam ESG US Large Cap Equity ETF (IQSU) checks both boxes.
IQSU, which turns three years old in a few weeks, has quietly been successful in the ultra-competitive world of ESG ETFs, as highlighted by its $382 million in assets under management. More such growth could be on the way as ESG success expands, paving the way for other related concepts to flourish.
“The success of the ESG movement has set the table for broader discussions on the future of sustainable finance. We are coming full circle, moving away from a pure financial focus on integrating ESG factors towards recognising that investors have real impact on the world – and that their ability to generate sustainable returns relies on a healthy planet and population,” according to BNP Paribas research.
IQSU follows the IQ Candriam ESG US Equity Index, presenting investors with access to large-cap domestic stocks with favorable ESG traits. Additionally, the data-rich DNA of IQSU’s index methodology could be an attractive selling point for long-term investors.
“At the most basic level, ESG indicators convey dispassionate information about company management that can materially impact results. True, the data is often sparsely disclosed, rarely audited and diversely interpreted. For thoughtful investors, properly analysed data can convey important and tradable information that can lead to outperformance,” added BNP Paribas.
The weighted average market capitalization of IQSU components is $536.7 billion, according to issuer data, indicating that there are elements of quality and safety found with this fund.
There are also, potentially, value considerations because many of IQSU’s marquee holdings are growth stocks that tumbled this year, but are quality names now sporting unusually attractive multiples. Plus, IQSU itself is one of the most cost-effective ETfs in this category — an attractive point for cost-conscious investors.
“Some critics say the industry uses ESG as an excuse to charge more. While this may be the case for some passive funds and their ESG equivalents, the data does not support this claim for the bulk of actively managed ESG funds. For the most part, ESG funds are priced similarly to equivalent standard funds,” concluded 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.