Climate Investing Could Lift These ETFs’ Profiles in 2023 | ETF Trends

Investors looking to pinpoint some certainties pertinent to the 2023 outlook for environmental, social, and governance (ESG) exchange traded funds may want to consider focusing on sustainability and climate investing strategies.

Investors can accomplish that objective with either dedicated climate funds or ETFs, including the Invesco ESG Nasdaq 100 ETF (QQMG) and the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG). As their names imply, the large-cap QQMG and QQJG are diverse ESG ETFs, but many of their components are either climate-savvy companies or firms that are purveyors of climate-related products and services.

The depth offered by QQMG and QQJG is pertinent because extreme weather scenarios, such as the ongoing drought in California and the recent spate of frigid temperatures in the Northeast, are prompting more corporations, investors, and politicians to focus on climate change.

“The most important large-scale trend shaping the ESG-investing world is undoubtedly climate change, including decarbonization of sectors and economies, as well as investors’ and companies’ attempts to chart a course to net-zero,” according to index provider MSCI.

QQMG and QQJG both track Nasdaq indexes, and that presents both ETFs with growth profiles and tech-heavy lineups. However, that serves the aim of providing exposure to clean tech companies or broader corporations that are pioneering products and technology that can positively contribute to the fight against climate change. Plus, the breadth offered by the Invesco ETFs is relevant on other fronts.

“It is not surprising that many on our research team touch on climate change across a variety of angles: from carbon credit funds to insured emissions, and from scrutiny of net-zero targets to decarbonising industrial real estate,” said Meggin Thwing Eastman, managing director and global ESG editorial director at MSCI.

Another avenue in which QQMG and QQJG offer climate relevance is the work many companies are just starting in order to bolster their climate profiles. Put another way, in the court of public and financial market opinion, it’s better to be on the side of at least making climate-related efforts rather than appearing to be a slacker on that front.

“According to MSCI, of the 9,238 constituents in the MSCI ACWI Investable Market Index as of October 2022, 36 per cent (3,306) gave set climate targets. Of these, 715 companies have set targets aligned with the Paris Agreement and approved by the Science-Based Targets initiative (SBTi), while just 45 have set net-zero emissions targets for 2050 or earlier under the SBTi corporate net-zero standard, one of the most rigorous net-zero standards across industries,” concluded the index provider.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.