Environmental, social, and governance (ESG) investing will be a force to be reckoned with for some time to come. Advisors can consider ETFs like the SPDR S&P 500 ESG ETF (EFIV).

“Sustainable funds in the U.S. attracted $51.2 billion in 2020, more than double the previous calendar-year record of $21.4 billion set in 2019, according to researchers at Morningstar Inc,” a Bloomberg article highlighted. “Still, the American market remains a fraction of the size of Europe’s, which accounts for about 81% of the $1.65 trillion of global assets in sustainable funds, Morningstar reported.”

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. The fund’s top three holdings as of January 29 are Apple, Microsoft, and Amazon.

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.
  • Strong performance, as the fund is up 21% the past year.

EFIV Chart

Green Bonds Are on the Rise

One specific corner of ESG that will gain more traction is green bonds. Per the Bloomberg article, “Governments, corporations and other groups raised a record $490 billion last year selling green, social and sustainability bonds. A further $347 billion poured into ESG-focused investment funds—an all-time high—and more than 700 new funds were launched globally to capture the deluge of inflows.”

Furthermore, “Moody’s Investors Service expects sustainable-debt issuance to reach $650 billion while money flows to ESG funds show no signs of slowing. This will be the year of ‘green stimulus as major economies attempt to integrate their economic recovery and job creation initiatives with their longer-term efforts to reduce carbon emissions’.”

“We expect green bond issuance to jump by 39% this year as the economy continues to rebound and issuers increasingly pursue debt financing for environmentally-friendly projects,” said Matthew Kuchtyak, a Moody’s analyst.

For more news and information, visit the ESG Channel.