ESG Priorities Differ for Clients and Advisors | ETF Trends

The 2021 Annual Russell Investments ESG Manager Survey results were released recently and reflect an increasing prioritization of climate risk for clients, while asset managers resoundingly were more focused on governance, reported Advisor Perspective.

The survey included 369 asset managers globally with a collective $79.6 trillion in AUM. The findings of the survey reflect the continued growing interest in environmental, social, and governance (ESG) investing; of the respondents, 55% reported that their firm currently has an ESG professional employed, compared to just 43% last year.

ESG metrics cover a broad number of categories, but respondents said overwhelmingly that climate risk was the most asked and talked about by their clients. 39% of the survey participants reported climate risk concerns by their clients, 21% had concerns regarding general environmental issues, and 15% were concerned about diversity, equity, and inclusion. As climate change and climate concerns continue to be a hot topic amongst businesses, industries, and governments, there has been a sharp focus by clients on how climate risk will impact their portfolios.

When asked what their most important priority was within ESG, advisors reported governance as the highest consideration. It’s a choice that makes sense because how a company is run is something that applies across industries and sectors, where environmental concerns can vary in aspect as well as how important they are within different industries. For advisors, the focus is on financial returns and value, and how a company is managed plays most directly into driving returns and performance. However, climate concerns are on the uptick compared to previous years.

Investing in ESG With SPDR

The SPDR S&P 500 ESG ETF (EFIV) takes a holistic approach to ESG investing by not only focusing on the environmental aspect of ESG, but on sustainability across the social and governance practices of the companies it invests in as well.

The fund tracks the S&P 500 ESG Index, which selects from top companies that meet ESG criteria within the S&P 500, while also adhering to the sector weights of the S&P 500 Index.

EFIV utilizes SPDJI ESG scores to rank companies based on their sustainability. This score is derived from analyzing a thousand data points covering a variety of topics collected from companies and then asking roughly 120 questions, according to the S&P Global website.

EFIV excludes companies involved in tobacco and controversial weapons, those that generate power from coal or derive 5% or more of their revenues from thermal coal extraction, and companies that score low on the United Nations Global Compact standards.

The ETF’s top three sector allocations include 31.09% in information technology, 14.77% in consumer discretionary, and 12.37% in healthcare, as well as several other smaller allocations.

EFIV has an expense ratio of 0.10%, making it one of the cheapest ESG ETFs on the market.

For more news, information, and strategy, visit the ESG Channel.