Environmental, social and governance (ESG) investing was a niche corner of the capital markets, but it gained traction quickly and has become a household name even during the height of the Covid-19 pandemic. As such, some market experts posit that ESG will become a mandatory part of an investor’s portfolio.
A Fortune article noted that ESG investing “saw global assets under management hit a record $1 trillion, according to Morningstar. That was on the back of net inflows of $7.1 billion in those three months alone.”
“I think now we are in a moment where, in the mainstream portfolio, ESG will be mandatory,” says Michael Herskovich, head of corporate governance at BNP Paribas Asset Management in Paris.
Where can ETF investors find quality ESG funds? Here are a few to consider:
- iShares ESG Aware MSCI USA ETF (ESGU): seeks to track the investment results of the MSCI USA Extended ESG Focus Index. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. The underlying index is optimized index designed to reflect the equity performance of U.S. companies that have favorable environmental, social and governance (“ESG”) characteristics (as determined by the index provider), while exhibiting risk and return characteristics similar to those of the MSCI USA Index (the “parent index”).
- iShares MSCI KLD 400 Social ETF (DSI): seeks to track the investment results of the MSCI KLD 400 Social Index composed of U.S. companies that have positive environmental, social and governance characteristics. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index is a free float-adjusted market capitalization index designed to target U.S. companies that have positive environmental, social and governance (“ESG”) characteristics.
- FlexShares STOXX Global ESG Impact Index Fund (CBOE: ESGG): ESGG seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® Global ESG Impact Index. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to environmental, social, and governance characteristics relative to the STOXX® Global 1800 Index, a float-adjusted market-capitalization weighted index of companies incorporated in the U.S. or in developed international markets. The fund will invest at least 80% of its total assets in the securities of the index and in ADRs and GDRs based on the securities in the index.
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