Global index provider MSCI witnessed firsthand just how popular environmental, social, and governance (ESG) investing has been with a recent spike in demand. This should continue to fan the flames for ESG funds like the SPDR S&P 500 ESG ETF (EFIV).
“MSCI, one of the leading providers of indexes for the financial markets, is seeing demand for environmental, social and governance ratings and index products outstripping growth in its traditional index business, Baer Pettit, chief operating officer of MSCI (ticker: MSCI), said in an interview with Barron’s,” a Barron’s article said.
“Approximately $200 million of the firm’s revenues are now ‘tied to ESG and climate,’ and are growing ‘in the 30 percentages in this area,’ Pettit said. ‘It’s growing dramatically, faster than even the second major closest category, the index business.’ The latter is growing ‘in the low teens.’ MSCI had $1 billion in revenue in 2020, up 10.4% from a year earlier.”
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 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 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.
A Further ESG Boost by Year’s End
Given the strong demand for ESG products, it’s no surprise that MSCI is expecting more adoption by year’s end. The index provider conducted a survey of institutional investors around the world to gauge interest in ESG investment.
“According to a recent MSCI survey of 200 institutional investors across the globe, 73% plan to increase ESG investment by the end of 2021,” the article explained. “Among the largest firms, or those managing more than $200 billion in assets, the pandemic was a critical driver of plans to boost ESG integration. For the same firms, climate change is a critical risk, with more than 50% saying they actively use climate data to manage risk.”
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