Pandemic Catapults ESG into the Investing Spotlight

Environmental, social, and governance (ESG) investing continues to be at the forefront of opportunities that can thrive through the Covid-19 pandemic. As such, the pandemic is essentially catapulting ESG into the investing spotlight with more strength to come.

Per a Financial Times report, ETFs that “emphasize good environmental, social and governance factors have surged in popularity, as investors look to boost their returns and push companies to become better corporate citizens. As of July 30, ESG-themed ETFs had pulled in a record-setting $38bn in new money for the year and topped $100bn in total assets for the first time, according to the most recent available data from ETFGI.”

“This rapid growth mirrors the huge asset gains in sustainable mutual funds, and the trend is showing no signs of slowing,” the article added. “Matteo Andreetto, head of State Street Global Advisors’ SPDR ETF business, predicts ESG ETFs and index mutual funds could reach $1.3tn by 2030. While ESG funds were gaining steam before this year, he believes the pandemic has put a spotlight on the need to improve issues such as income inequality, diversity and climate change.”


^MSACWIESGF data by YCharts

Investors who want ESG exposure via an ETF wrapper can take a look at the Xtrackers MSCI EAFE ESG Leaders Equity ETF (EASG). EASG seeks investment results that correspond generally to the performance of the MSCI EAFE ESG Leaders Index.

The fund will invest at least 80% of its total assets (but typically far more) in component securities (including depositary receipts in respect of such securities) of the underlying index. The underlying index is a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers.

An additional fund to look at is the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE Arca: USSG), which has been a popular play for investors seeking exposure to socially responsible investments. USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The underlying MSCI USA ESG Leaders Index provides exposure to large- and medium-cap U.S. companies with high ESG performance relative to their sector peers.

One ETF with a focus on low carbon emissions is the iShares MSCI ACWI Low Carbon Target ETF (CRBN). The fund seeks to track the investment results of the MSCI ACWI Low Carbon Target Index, which is designed to address two dimensions of carbon exposure – carbon emissions and potential carbon emissions from fossil fuel reserves.

For more market trends, visit  ETF Trends.