In recent years, the audience for environmental, social, and governance (ESG) investing strategies expanded in significant fashion, indicating that a broader cross section of market participants finds values-based investing appealing.
Still, some Baby Boomers and, to a lesser extent, members of Gen X, aren’t ready to direct substantial capital to ESG strategies, including exchange traded funds. Fortunately for fund issuers, there’s ample ESG enthusiasm among Millennial and Gen Z investors. That could be a long-term positive in terms of asset growth for products such as the Invesco ESG Nasdaq 100 ETF (QQMG) and the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG).
A recent survey conducted by the Society for Human Resource Management (SHRM) indicated that ESG initiatives are increasingly important to American workers, particularly those in younger demographics. Those priorities could encourage those investors to evaluate ETFs such as QQMG and QQJG as assets for discretionary and individual retirement accounts (IRAs).
“Environmental factors were overwhelmingly reported as the most important ESG issue to the 1,009 U.S. workers responding to SHRM Research’s survey in 2022—more than half (54 percent) indicated they were most important, followed by social issues (24 percent) and governance (11 percent),” noted SHRM’s Kathy Gurchiek.
In terms of meeting the demands of increasingly environmentally savvy investing blocs, QQMG and QQJG check that box due underlying index construction. The benchmarks tracked by the Invesco ETFs only allow companies that meet the United Nations Global Compact principles. Many of the firms that don’t meet that requirement are environmental offenders or have the potential to become so in the future.
One way of looking at that scenario is that QQMG and QQJG, helped by index construction, can reduce investors’ exposure to potential environmental controversies. That’s a positive because such events are costly and often take share prices years to recover from.
To be sure, the social and governance initiatives being embraced by QQMG and QQJG member firms are also important to younger investors and workers.
“Among social ESG initiatives, U.S. workers overall told SHRM the three most important issues were improving employee health and safety; improving employee working conditions; and helping local communities, such as by contributing to food drives, community cleanups and local donations,” added SHRM.
In terms of management, six in 10 executives believe that ESG goals help attract talent, and nearly two-thirds believe that those plans help in recruitment efforts, according to SHRM. Those data points could bode well for QQMG and QQJG holdings over the long term.
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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.