The landscape for environmental, social and governance (ESG) investing is evolving and so are market participants’ demands. While the “E” hasn’t entirely been solved, it’s been well-addressed. With that, more attention is shifting to social issues.
Increased corporate awareness and effort on the social front could be a catalyst for ESG ETF adoption, potentially stoking demand for products such as the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG) and the Invesco ESG Nasdaq 100 ETF (QQMG).
ESG ETFs, including QQJG and QQMG, could be pertinent to asset allocators as social awareness blooms. That’s because the subject takes on a variety of forms and issues, and its definition isn’t linear. QQJG and QQMG potentially enjoy advantages at a time when social investing is increasingly important because the funds are backed by clear ESG ratings scores.
Social Matters in ESG in Focus
While ESG investing isn’t a new concept, focus on the “S” is because environmental and strong governance standards have long been in focus.
“For years, the social pillar has been considered relatively nebulous and hard to quantify. BNP Paribas found in 2021 that more than half of the 350 institutional investors around the globe surveyed believed the “S” was the most difficult to analyze and integrate,” reported Alex Harring for CNBC.
The importance of socially aware investing is increasing. Therefore, so could the allure of easy-to-understand products such as QQJG and QQMG. That’s because there are complexities associated with making social investing appealing to the a broad swath of retail investors.
“While data around human capital and diversity has improved over the past several years, investing professionals still see a lack of standardized information that can make social themes harder to integrate. The patchwork of data can also make apples-to-apples comparisons between competing companies more difficult,” according to CNBC.
QQJG and QQMG enjoy other benefits. Notably, the pair of Invesco ETFs both track indexes that are ESG descendants of the widely observed Nasdaq-100 Index (NDX). That level of familiarity, particularly with the large-cap QQMG, can provide new ESG investors with a level of comfort as they embark upon socially aware investing journeys.
As noted above, QQJG and QQMG are index-based funds, but there are lessons from the world of active management. Some of the most widely held stocks at actively managed socially directed funds include Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOG) and Meta Platforms (NASDAQ: META). That quartet combines for over 32% of the QQMG portfolio.
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