Corporate Climate Efforts Could Reward Long-Term Investors | ETF Trends

When it comes to environmental, social, and governance (ESG) investing, asset allocators and retail investors are demanding enhanced efforts on the social and governance fronts, but it will take time for corporations to make material headway in those departments. However, environmental and climate efforts remain more readily realized and a primary focus of many familiar corporations. That could signal an opportunity with ESG exchange traded funds, including the Invesco ESG Nasdaq 100 ETF (QQMG).

For climate-inclined investors, QQMG is a potentially relevant consideration for a variety of reasons, including various corporate net-zero efforts. Specific to the Invesco ETF, some of its member firms have already made ambitious net-zero pledges and are making progress to that effect.

“The rise of carbon dioxide and other greenhouse gas emissions has caused global warming. Global warming is a major threat to the financial system, posing risks for companies and all manner of investments,” according to Morningstar. “Each net-zero target comes with a pathway to achieving it. A number of industry groups have committed to achieving net zero, including some for banks and asset managers.”

Today, a growing number of investors are becoming familiar with net-zero, but there are climate-related endeavors and terms, some of which are relevant to QQMG holdings, that market participants should get up to speed on. Those include carbon offsets and science-based targets, among others. In both cases, some QQMG holdings are working on those pursuits or providing technologies to help clients realize related goals.

Science-based targets “are targets that companies adopt in line with the Paris Agreement’s goal of keeping global warming below 2.0 degrees Celsius — ideally, 1.5 degrees Celsius — compared with preindustrial temperatures. The targets, created by the Science Based Targets Network, provide companies with a clearly defined path to reduce emissions in line with the Paris Agreement,” added Morningstar.

With a 59.52% allocation to the technology sector, QQMG could eventually be at the forefront among diversified ETFs with climate credibility. The fund’s significant tech exposure could also prove fruitful when it comes to carbon offsets.

“This is an action taken by an emitter to compensate for its emissions. One kind of carbon offset is planting trees, which remove carbon dioxide through photosynthesis, to cancel the impact of emissions created by taking a flight. Another kind is a tradable certificate that is linked to activities that lower the amount of carbon dioxide in the atmosphere,” concluded Morningstar.

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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.