Various studies confirm that there are bottom-line benefits for companies that prioritize environmental, social, and governance initiatives. That can lead to better outcomes for shareholders over the long term.
It’s not surprising that some ESG experts believe that chief financial officers (CFOs) are crucial to driving positive ESG change. From an investment perspective, that theme is arguably obtuse, but it has merit, and investors may be able to access it indirectly with exchange traded funds such as the Calvert US Select Equity ETF (NYSE Arca: CVSE).
The fund, which debuted in January, has the goods for tapping into executive-driven ESG change, as the ETF invests in “companies that Calvert believes are leaders and most compelling improvers in management of financially material environmental, social and governance (ESG) factor,” according to the issuer.
CVSE — Active Meets ESG
CVSE is actively managed. That serves the dual benefit of exposing investors to companies with strong ESG credentials while helping them avoid ESG pretenders. Additionally, active oversight of the fund could position investors to capitalize on more CFO auguring for ESG change.
“Consultants suggest that centralising ESG responsibilities within the finance department, despite its expertise in data and reporting, is impractical due to the extensive requirements and diverse corporate interests involved,” reported Lucy Bucholz for Sustainability.
One way CFOs can bolster their companies’ ESG resumes is to focus on the present and the future instead of relying on old methodologies and stale data to accomplish ESG goals.
“Many CFOs face challenges in establishing a data baseline and determining which data to collect when it comes to ESG disclosures,” added Sustainability. “These disclosures are often vague, leading companies to make ambitious claims of achieving net zero status by specific dates. However, ensuring the accuracy and traceability of data is crucial for making reliable forward-looking calculations.”
Another perk of CVSE is that the ETF’s area of emphasis is domestic large-cap stocks. That’s an asset class with, broadly speaking, established commitment to ESG and the resources to avoid greenwashing. This is important because forward-thinking companies can avoid drawing the ire of regulators when it comes to ESG. That’s relevant for CVSE holdings and beyond because more ESG regulations are coming down the pike.
“The SEC’s forthcoming climate disclosure rules will mandate public companies to report climate-related risks and emissions, including Scope 3 emissions from their supply chains. These rules would require SEC-registered companies to include various climate data in reports and any climate-related costs exceeding 1% of total line item values to be disclosed, too,” concluded Sustainability.
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