Over the past several years, the population of ESG exchange traded funds expanded at a feverish pace. That rapid expansion has made it easy for some potentially strong funds to get lost in the shuffle.
Take the case of the Invesco ESG Nasdaq 100 ETF (QQMG). That ETF follows the Nasdaq-100 ESG Index and turned two years old in October. But it has toiled in relative anonymity over that span. Based on 2023 performance alone, QQMG deserves better, as highlighted by a year-to-date return of almost 40%.
Owing to its status as an ESG equivalent of the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), QQMG has been aided this year by the ascent of large- and mega-cap growth stocks, including the magnificent seven. That’s one example of QQMG being a credible avenue for returned-minded ESG investors.
QQMG Gaining More Acclaim
It remains to be seen, but more advisors and investors could become interested in QQMG. That’s because it’s now an established ETF, and launches of ESG funds are slowing.
“Sustainable fund launches have slowed along with net flows in 2023, but opportunities exist for investors who want to steer a portion of their portfolios toward social and environmental progress and away from related risks,” noted Morningstar analyst Alyssa Stankiewicz.
The research firm included QQMG on its list of top new sustainable funds in the “satellite holdings” category. That group features both ETFs and mutual funds, and only funds with at least $20 million in AUM. With an annual fee of 0.20%, QQMG is one of the most cost-effective funds on that Morningstar list.
That low fee speaks to one of QQMG’s perks as a passively managed fund. But so do some of the risks associated with actively managed large-cap growth ESG strategies.
“Additionally, when portfolio managers (especially on concentrated, high-conviction strategies) are faced with massive, rapid inflows, it can push them to invest in securities that might not be their top picks,” added Stankiewicz. “This latter concern is somewhat mitigated in broad-market, index-tracking funds, where new capital is relatively easy to deploy, and indeed many of the funds listed here are systematic or passive strategies.”
QQMG holds 93 stocks, which “must be deemed compliant with the United Nations Global Compact principles, meet business controversy level requirements, and have an ESG Risk Rating Score that meets the requirements for inclusion in the Index,” according to Invesco.
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