Bitcoin and environmental, social, and governance (ESG) investing have been forces to be reckoned with in the capital markets the past year. The two could be set for a head-on collision as institutional investors try to balance cryptomania with ESG initiatives.
In a Man Institute article, Robert Furdak, chief investment officer for ESG at Man Group, noted that the leading cryptocurrency and ESG could be going head-to-head in the capital markets.
“The two major investment trends looming large over the hedge fund and asset management world – bitcoin’s stratospheric surge and investors’ rush towards responsible investing across all mandates – are now set for a ‘head-on clash,'” the article said.
“Hedge funds are continuing to profit from the ongoing surge in the cryptocurrency sector, as more managers pour money into digital assets’ record rise this year,” the article added. “At the same time, though, an increasingly large number of investors are calling for hedge funds to take a sustainability-based stance and implement ESG-compliant factors in their portfolios.”
Furdak pointed out how Bitcoin mining requires substantial energy consumption and will continue that way for some time.
“Bitcoin’s energy consumption is well-known to investors. However, concerns about its deleterious social consequences and poor governance protocols may have fallen off the radar,” Furdak added. “One possible solution to these issues is a path taken by responsible investors in public markets: engagement. However, for now, the ESG and cryptocurrency megatrends are heading for a collision course.”
A Low-Cost ESG ETF Option
Cost-conscious investors can look for ESG exposure with funds like the SPDR S&P 500 ESG ETF (EFIV). EFIV’s expense ratio comes in at 0.10%.
The fund seeks to provide investment results that correspond generally to the total return performance of an index that provides exposure to securities that meet certain sustainability criteria (criteria related to ESG factors) while maintaining similar overall industry group weights as the S&P 500 Index. In seeking to track the performance of the S&P 500 ESG Index, the fund employs a sampling strategy, which means that it is not required to purchase all of the securities represented in the index.
Overall, EFIV gives investors:
- Investment results that, before fees and expenses, correspond generally to the S&P 500 ESG Index.
- Potential ESG core exposure, based on its focus on sustainability criteria and comprehensive market coverage of the flagship core S&P 500 Index.
- A low expense ratio of 0.10%, 27 basis points below the category average.
- Strong 12-month performance, with a 23% gain.
For more news and information, visit the ESG Channel.