ESG Matters to Employees, Too | ETF Trends

Environmental, social, and governance (ESG) virtues are proving highly applicable at the investment level. Thus, the rapid proliferation of related exchange traded funds in recent years.

It’s not just asset allocators and retail market participants that are prioritizing ESG. Employees are on board with that trend, too. In fact, various studies suggest that companies with strong ESG credentials are better positioned to attract and retain top talent. That could be a long-term positive for ETFs, such as the Invesco ESG Nasdaq 100 ETF (QQMG).

QQMG, which follows the Nasdaq-100 ESG Index, is home to 93 stocks — many of which hail from companies that have been pioneers in corporate-level embracing of ESG principles. That’s an important trait at a time when labor pools are tight. The Do Employees Have Useful Information About Firms’ ESG Practices? report published last year by Hoa Briscoe-Tranat highlighted the importance of ESG to staffers.

“The author analyses 10.4 million anonymous reviews by employees of their employers – some 300 000 public and private companies – on career intelligence site to get an inside view of ESG practices. The resulting measure could be used not only to predict a firm’s future misconduct, accounting issues, shareholder activism and downside risk, but also its valuation, sales growth and likelihood of entering Fortune’s list of 100 Best Companies,” according to BNP Paribas.

There’s evidence supporting the notion that healthy ESG resumes can lead to inclusion on the Fortune list of 100 top companies to work for. The top 10 of that list includes a quartet of QQMG member firms — Cisco Systems (NASDAQ: CSCO), Nvidia (NASDAQ: NVDA), Comcast (NASDAQ: CMCSA), and Marriott International (NASDAQ: MAR).

The list is a mix of public and private firms and includes other QQMG components such as Adobe (NASDAQ: ADBE), Intuit (NASDAQ: INTU), and Vertex Pharmaceuticals (NASDAQ: VRTX).

Point is, there are ties between ESG efforts and employee satisfaction. Additionally, the study indicated that ESG is frequently mentioned by workers in their reviews of employers, and that interest increases following major ESG controversies.

“Moreover, the employees’ attention to ESG topics, as measured by the percentage of ESG words in a review, remained stable between 2008 and 2021, suggesting that the employees have long cared about ESG issues.  And their attention spikes around major ESG events,” added BNP Paribas.

Bottom line: Companies emphasizing ESG may have advantages over rivals, not just because the former may readily avoid ESG controversies, but also because they’re desirable destinations for talent.

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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.