Hedge Fund Titan Bill Ackman Backs ESG Investing

Hedge fund titan and founder/CEO of Pershing Square Capital Management Bill Ackman was effusive in his praise of environmental, social, and governance (ESG) investing in a recent Pershing Square Holdings 2020 report.

“With the benefit of substantial philanthropic and investing experience, I have come to believe that capitalism is likely the most powerful potential force for good in addressing society’s long-term problems,” said Ackman, per a Yahoo! Finance article. “A successful business operating ethically and sustainably can create many thousands of high-paying jobs, deliver high long-term returns for pensioners, long-term savers and other investors, and provide goods and services that materially increase its customers’ quality of life, broadly defined. That said, capitalism is far from perfect,” he added.

ESG has not only become a force in terms of attracting investors capital by the droves. The investing space has also performed admirably amid the pandemic last year, and continues to do so in the current market environment.

“We believe that good ESG practices are fundamentally aligned with running a successful business,” the report said. “As consumers and other corporate customers have become increasingly educated on matters of ESG, they have begun to avoid companies that contribute to climate change or do not treat their employees well, while rewarding companies with their business that have sustainable and responsible policies.”

“Similarly, a growing number of investors have become increasingly concerned about the risks of companies which do not take ESG issues seriously,” the report added further. “These investors avoid investing in companies which do not meet high ESG standards, reducing the valuations and investment returns of these businesses, negatively impacting their cost of capital.”

A Low-Cost ESG ETF Option

More money keeps on flowing into ESG investing, which bodes well for the ETF landscape and funds like the S&P 500 ESG ETF (EFIV).

The average ESG ETF ratio stands at about 0.20%. EFIV is half of that, with a paltry ratio of 0.10%.

EFIV 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 ETF 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.

EFIV Chart

For more news and information, visit the ESG Channel.