ETF Edge: Climate Change And Other Key Drivers In 2021's ETF Space

During this week’s “ETF Edge,” host Bob Pisani had questions concerning the issue of climate change, which is a strong focus for the Biden administration. ETF Trends CIO and Director of Research, Dave Nadig, Jan van Eck, CEO for VanEck, and Harry Whitton, Head of ETF Sales Trading for Old Mission, went through the various ways to break down the impact this could have on ETF investing in 2021.

According to Nadig, he clarifies the Biden administration will be clear in favoring ESG investing and concerns. However, the question will come down to the level of demand, which currently does not seem to be at any risk of decreasing.

Nadig states, “Whether its the millennial wealth transfer or just high net-worth individuals looking to do something different with their money, ESG is rapidly being recognized not just as a values expression, but as a risk management tool, and I think risk management is where ESG is going to find its really strong legs over the next 2-3 years.”

Whitton adds how, when it comes to the ESG space, many firms have made allocations in their models with regard to ESG funds. So, some people may not even realize they are a part of it already. It’s a big part of these models, and it’s going to be a constant cash flow into the space.

For Jan van Eck, as far as the ongoing trend, he focuses on the “E” in ESG, which stands for the environment. He believes there is a strong consensus around it, which he refers to as the energy transition, a 10-20 year plan to move away from fossil fuels. It’s happening in many areas across the world, namely Europe and especially China.

In regards to ETFs, van Eck states, “I think active management can add a lot of value. It’s absolutely a major trend, and we talk about it a lot with clients.”

Key ETF Drivers

Turning back to Nadig, Pisani has questions about other themes for 2021, including the hunt for yield and how to increase exposure for infrastructure. In response, Nadig notes how the hunt for yield has really shifted by way of alternative income vehicles that came into their own, such as investment-grade bonds and products using options to extract income from the equity market.

“When thinking forward to next year, you have to ask yourself, ‘What can the Biden administration get done?’ assuming we end up with deadlock,” Nadig adds.

It’s a worthy consideration because, in a deadlock environment, infrastructure is one of the only things that could likely garner strong bipartisan support, as it helps Government spending, which could really use a bigger response.

“I think this is a great opportunity. There are a bunch of great funds in the space. I think we’ll see a lot of traction probably coming in the second quarter.”

Watch Dave Nadig Talk Key Drivers & Climate Change On ETF Edge:

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