Environmental, social, and governance (ESG) principles are applied in various forms at the sector level, and the real estate sector is an example of a group with lots of room to bolster ESG credentials.
Some exchange traded funds answer that bell, including the Invesco MSCI Green Building ETF (GBLD). GBLD is about a year old and follows the MSCI Global Green Building Index.
“When creating ESG products, our exchange-traded fund (ETF) team partners with ESG-savvy index providers to design indexes that identify and weight securities according to meaningful ESG metrics. And then we create ETFs to give all types of investors easy access,” according to Invesco.
While many investors are well acquainted with the real estate sector, turning to the group for above-average income and defensive traits, the idea of marrying ESG principles with the sector is still relatively new. Fortunately, the definition of green building is easy to understand for investors of all experience levels.
“Green building companies include the design, construction, redevelopment, retrofitting, or acquisition of green-certified properties to promote mechanisms for raising capacity for effective climate change mitigation and adaptation,” adds Invesco.
Regarding income — the primary reason that many investors embrace real estate stocks and ETFs — GBLD proves that going green doesn’t mean sacrificing income. The fund has a distribution rate of 3.19%, according to issuer data, putting it well ahead of the widely followed MSCI US Investable Market Real Estate 25/50 Index.
GBLD is a departure from the standard real estate ETF on another front in that it’s not large-cap dependent. Over 77% of GBLD’s 89 holdings are mid- or small-cap stocks. That gives GBLD a bit of a growth feel to go along with its favorable dividend and ESG traits. That combination could benefit investors over the long term.
“For many investors, ESG (environmental, social, and governance) considerations are important factors when it comes to evaluating potential investments. By selecting ETFs with strategies that align with their own values, investors can gain exposure to dynamic sectors of the 21st century economy while also investing in a brighter tomorrow,” adds Invesco.
GBLD also offers investors global diversification. The fund features exposure to 10 countries, with the U.S. accounting for just 36.21%. That’s important because besides the U.S., several of GBLD’s other geographic exposures are unlikely to raise interest rates as rapidly as the Federal Reserve, if at all.
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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.
