The universe of environmental, social and governance (ESG) exchange traded funds is undoubtedly expanding, and with that rapid proliferation comes the need for less controversy and proper strategic implementation. Not all ESG ETFs adequately address those issues. One ESG fund that does is the Invesco ESG Nasdaq 100 ETF (QQMG).
QQMG’s straightforward methodology is appropriate for investors that are new to ESG investing as well as those market participants that see value in focusing on ESG principles over the long term.
“But for ESG, we’re talking about longer-term strategies. ESG includes the way that companies are looking at environmental impacts, social impacts, and their governance structures today, and making decisions about that that will impact the companies and potentially, their value over the longer term,” noted Lauren Puffer, head of sustainability banking at Cowen.
About 14 months old, QQMG is pertinent at a time when many asset allocators are more sophisticated about ESG and demanding that related strategies go beyond an emphasis on the “E” to include more focus on social and governance matters.
“Many companies are starting to look more deeply into the S, how are they strategizing around their own employees, their community relations, and what does that look like in terms of attracting talent?” added Puffer. “What does that look like in terms of voluntary turnover, in terms of operating in different areas that might have sensitivities around communities? Then, how do they measure that? And then how do they report it out to not only their investors but also their stakeholders at large and what that looks like.”
With its links to the Nasdaq-100 Index – it tracks the ESG equivalent of that benchmark – QQMG is predictably growth-heavy. However, that’s advantageous in the ESG conversation because companies such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG), among others, have long prioritized ESG principles.
Those firms and others long ago established impressive climate change and net zero credentials, allowing them to now place greater emphasis on governance and social issues. Those efforts could imply QQMG is home to companies that are taking comprehensive approaches to ESG at a time when that’s exactly what investors are demanding.
“And then how do companies shift from a focus on reporting to a focus on strategy when it comes to ESG? And then of course there’s the more philosophical, kind of more philosophical, but the way that I put it is we’ve had some bullish markets for the past couple of years, so what does ESG really look like if the economy really takes a downturn? And how do they approach the risks and opportunities that they can see in an economic downturn versus a pure play bull market?” concluded Puffer.
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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.