How big can environmental, social, and governance (ESG) investing get over the next five years? One way to take advantage of this megatrend is the SPDR S&P 500 ESG ETF (EFIV).
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that provides exposure to securities that meet certain sustainability criteria (criteria related to environmental, social, and governance (“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 “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 (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.
The fund is up 17% within the past year and with a 0.10% expense ratio, investors get performance at a low cost.
Two Growing Trends in ESG
ESG is still breaking into the mainstream of the capital markets.
“Whilst ESG highlights values, it’s also about profits, with environmentally and socially responsible funds continuing to out-perform the market and offer lower volatility,” said deVere Group CEO and long-time ESG advocate Nigel Green. “We believe this is an especially important initiative right now as ESG moves ever more into the mainstream. However, there are still investors who regard such investments as a ‘quirk’ or ‘nice to have’ rather than a legitimate portfolio diversification tool that delivers profits with purpose.”
The deVere Group also detailed how a growing trend of millennials are becoming ardent supporters of ESG.
“As millennials, who are statistically more likely to seek responsible investment options, become the major beneficiaries of the largest intergenerational transfer of wealth – an estimated $30tn in the next few years – we can expect both retail and institutional investors to continue to pile into ESG,” Green said.
For more news and information, visit the ESG Channel.