CFOs Are Now Using ESG Data to Cut Costs | ETF Trends

Environmental, social, and governance (ESG) metrics are giving chief financial officers (CFOs) the data necessary to make more informed decisions. This includes using ESG metrics to attract investors and lower costs.

A Wall Street Journal article noted that over “1,500 companies world-wide have pledged to reduce their carbon emissions to net-zero in the coming years, according to research by the NewClimate Institute, a nonprofit. Many have also made commitments to support diversity and inclusion.”

This, in turn, is putting pressure on more CFOs to incorporate ESG metrics as standard fare.

“We need to take a broad and long-term view…and look at the intangibles that any investment can bring to the table, we need to look at the bigger picture,” said Sreedhar N., chief financial officer at Compagnie de Saint-Gobain SA, a French manufacturer of construction materials.

“Twenty companies in the S&P 500 mentioned the acronym ESG or sustainability on earnings conference calls between Oct. 1 and Dec. 31, compared with only six companies three years before, according to FactSet, a data provider,” the WSJ article added. “Globally, the term ESG was mentioned 205 times on investor calls during the fourth quarter of 2020, research platform Sentieo found.”

Where to Get ESG ETF Exposure?

One way to get ESG exposure via an ETF is the SPDR S&P 500 ESG ETF (EFIV). 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.
  • Exposure to an index that is designed to select S&P 500 firms meeting certain sustainability criteria (related to environmental, social, and governance factors) while maintaining similar overall industry group weights as the S&P 500 Index.
  • Potential ESG core exposure, based on its focus on sustainability criteria and comprehensive market coverage of the flagship core S&P 500 Index.

EFIV Chart

For more news and information, visit the ESG Channel.