Environmental, social and governance (ESG) investing endured political controversies, regulatory scrutiny and tepid fund-level demand in 2023. But obituaries weren’t penned for ESG this year, nor should they have been.
After all, exchange traded funds such as the Invesco ESG Nasdaq 100 ETF (QQMG) notched stellar showings this year. Those were helped in large part by growth stock leadership. Obviously, investing is a bottom-line endeavor and performance is what matters most at the end of the day. But some other positive ESG trends emerged this year. Some of those may be underappreciated with 2023 drawing to a close.
For example, data confirms that more U.S.-based companies, including QQMG member firms, are stepping up to the plate and making improved ESG reporting a priority. Those efforts could pave the way for broader adoption of ESG exchange traded funds.
ESG Reporting Trending in Right Direction
It could prove constructive that more corporations are making efforts on the ESG reporting front.
“Despite challenges and the recent ESG backlash, companies remain committed to the work of ESG and CSR. Recent data supports the continued relevance of ESG and CSR practices, underlying their critical role in risk mitigation and financial success. A June 2023 study from the Center for Audit Quality found that ESG reporting among the S&P 500 is now approximately 99%,” reported EHS Today.
While QQMG’s methodology is clear and easy to understand, that’s a status not shared across the landscape of ESG ETFs. There’s also a lack of uniformity regard ESG ratings and reporting. Those factors are headwinds to broader ESG ETF adoption.
Fortunately, those scenarios are expected to improve as soon as next year. Plus, there are other emerging ESG tailwinds that could be supportive of funds such as QQMG. For example, data indicates more high-ranking executives view ESG as a value-add, while others see merit in committing to more ESG efforts.
“Contrary to the narrative that companies are scaling back or abandoning ESG and CSR, most are continuing to prioritize progress towards their social impact goals. According to KPMG’s 2023 CEO Outlook report, 69% of CEOs have embedded ESG into their business as a means of value creation,” added EHS Today. “They also recognize that there is more work to do. 68% indicate that their current ESG progress is not yet strong enough to withstand the scrutiny of stakeholders and shareholders. But progress won’t continue if resources are not commensurate with the expected growth.”
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