These days, there’s plenty of talk about disinformation and misinformation. Some of it may well be applicable to environmental, social, and governance (ESG) investing, which has taken a beating in the court of public opinion.
Hear enough negativity about ESG investing and you may assume it’s on its last legs. That’s perception. In good news for ETFs like the Invesco ESG Nasdaq 100 ETF (QQMG) and the Invesco ESG Nasdaq Next Gen 100 ETF (QQJG), the reality is far brighter than current perceptions indicate.
Said another way, obituaries penned about ESG investing were premature. Still, ETFs like QQJG and QQMG have hills to conquer. Media coverage, which created some of the glum perception, hasn’t been great.
“Fewer are the celebratory articles that were abundant three years ago around climate pledges, SEC moves against greenwashing, and the latest COP gathering. Based on the headlines, one might think that ESG is finished, that people who were incorporating these principles into their investment processes were quietly backing away,” noted PitchBook’s Hilary Wiek.
QQMG, QQJG Have the Goods
Greenwashing is a long-running concern among asset allocators that want to embrace ESG. Some investors are reserved because they’re fearful companies and funds are inaccurately boasting about ESG credentials. Regarding QQJG and QQMG, the ETFs’ index methodologies ensure ESG purity and greenwashing is mitigated.
Beyond avoidance of greenwashing, it’s not surprising that performance is a marquee issue for money managers. They want to know that allocating capital to ESG strategies doesn’t put them at risk of subpar returns. Over their respective lifespans, QQJG and QQMG have done admirable jobs of allaying those concerns.
“Our survey shows, however, that 55% of respondents who make impact investments prioritize market-rate returns as the primary objective when evaluating a potential investment opportunity,” added Wiek. “Only 7% said that concessionary returns are a top priority, with the remainder saying they’ll consider both market-rate and concessionary return impact opportunities. While concessionary return strategies do exist, when evaluating impact funds, the assumption shouldn’t be that every such fund is concessionary.”
As Wiek points out, many ESG devotees remain committed to the style. Additionally, a fair percentage of market participants aren’t in that cohort but are at least examining the strategy. Those could be signs the long-term reality is far better than current perceptions imply.
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