Sustainable ETFs Find Footing, Receptive Audience | ETF Trends

Environmental, social, and governance and sustainable investing have taken their lumps. These styles are under attack by some politicians and regulators, and the 2022 slump incurred by growth stocks didn’t help matters.

While policy issues linger, growth equities are rebounding, and end users remain enthusiastic about embracing sustainable investing strategies. That could pave the way for broader adoption of exchange traded funds such as the Calvert US Select Equity ETF (NYSE Arca: CVSE).

One of the newer entrants to the field of sustainable/ESG ETFs following its January debut, CVSE is relevant at a time when more retail investors are looking to express their values through investment products and as sustainability becomes a focal point in many corporations’ C-suites.

“Sustainability is key to society and to the investment industry. Retail investors are asking for it more and more and are actively seeking ways to give sustainability a prominent role in their investment portfolios. Morningstar’s fund flow data underline the ongoing growth of the green segment in the fund market,” according to Funds Europe.

Improved Regulatory Framework Could Lift Sustainable ETFs

One of the issues that has long vexed advisors and investors seeking access to ESG or sustainable funds is lack of uniformity from regulators and fund issuers in terms of defining “ESG” and “sustainable.” Fluidity on those fronts has undoubtedly been a barrier to adoption.

For its part, CVSE addresses some of those concerns as an actively managed fund. Active managers can take some liberties in terms of specific holdings and how those stocks fit into the fund’s portfolio. They can also potentially do a better job of ensuring a fund lives up to its sustainable billing than many index-based strategies.

On that note, more robust regulatory framework pertaining to sustainable investing could spur adoption of this style and sustainable ETFs such as CVSE. Fortunately, it appears that such a framework is emerging in some parts of the world, and that could provide a template for broader global usage.

“The Sustainable Finance Disclosures Regulation (SFDR) regulations package brought a lot of work to the industry’s plate; it is meant to outline what sustainability is, how it is incorporated into investment products, what their objectives are and – most important – how fund companies, asset managers and distributors should communicate with their end investors about it,” added Funds Europe.

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