Environmental, social, and governance (ESG) investing was such a force in the second quarter that not even Covid-19 could stop the space from accelerating its growth and outperforming even the S&P 500. That performance was readily apparent in two of the biggest exchange-traded funds (ETFs) in the ESG category: iShares ESG Aware MSCI USA ETF (ESGU) and iShares MSCI KLD 400 Social ETF (DSI).
“The top performer is BlackRock’s $9.2 billion iShares ESG Aware MSCI USA ETF (ESGU), up 10.1% (excluding reinvested dividends) since the start of the year, compared with the S&P 500’s 6.9% advance,” a Bloomberg article noted. “The iShares MSCI KLD 400 Social ETF (DSI) has risen 9.7%, the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG) has gained 7.4%, and the iShares ESG MSCI USA Leaders ETF (SUSL) has climbed 7.1%.”
The ESG space was already gaining popularity even ahead of Covid-19, but the pandemic only sparked more interest in this type of investing. If the current trends suggest future trends, then the ESG space can only experience more growth ahead.
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Other ESG Options in ETFs
ETF investors who want exposure to ESG can look to funds like the FlexShares STOXX US ESG Impact Index Fund (CBOE: ESG). For investors who want ESG exposure, as well as global diversification, can look to the FlexShares STOXX Global ESG Impact Index Fund (CBOE: ESGG).
ESG seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® USA ESG Impact Index. The underlying index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to ESG characteristics relative to the STOXX® USA 900 Index, a float-adjusted market-capitalization weighted index of U.S.- incorporated companies. Under normal circumstances, the fund will invest at least 80% of its total assets in the securities of the underlying index.
ESGG seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® Global ESG Impact Index. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to environmental, social, and governance characteristics relative to the STOXX® Global 1800 Index, a float-adjusted market-capitalization weighted index of companies incorporated in the U.S. or in developed international markets. The fund will invest at least 80% of its total assets in the securities of the index and in ADRs and GDRs based on the securities in the index.
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