Morningstar Survey Confirms Investor Relevance of ESG | ETF Trends

With increasing scrutiny on environmental, social, and governance (ESG) investing and the related exchange traded funds, some investors are assessing the merits of this investing style.

For those that are fans of it and those planning to allocate to ESG ETFs, such as the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG) and the Invesco ESG Nasdaq 100 ETF (QQMG), there’s encouraging news: A new survey by Morningstar indicates that ESG is relevant to a wide assortment of professional investors.

“ESG has become more material for asset owners in the past five years, according to 70% of the respondents. Environmental concerns win out over social and governance issues in terms of materiality, with the most significant issues being energy management and greenhouse gas emissions,” wrote Morningstar analyst Leslie Norton.

Bolstering the long-term case for ETFs such as QQJG and QQMG is the point that 85% of respondents in the Morningstar survey say that ESG considerations are “very material” or “fairly material” in their investment evaluation process.

Another encouraging sign for funds such as QQJG and QQMG is the point that greenwashing remains on asset allocators’ radars, and they want no part of it. Specific to the pair of Invesco ETFs, both employ relatable, straightforward methodologies that allay greenwashing concerns.

“Some 61% of respondents saw greenwashing as a ‘major’ or ‘moderate’ problem. Regulation was welcomed by many asset owners, with 60% regarding it as a ‘slight’ or a ‘major’ help. Two thirds had observed an improvement in the quality of ESG data, ratings, indexes, and tools over the past five years. But they felt that tools needed further improvement in terms of quality, relevance, and clarity,” added Norton.

For long-term investors, there are other sources of allure with QQJG and QQMG. Those include the sheer depth of asset allocators that are embracing ESG, including some of the highest-level professional investors.

“In a separate study on U.S. pension practices, Morningstar found that public pension funds are among the strongest proponents on key shareholder resolutions ranging from climate change and political spending to workers’ rights and pay equity,” concluded Norton.

QQMG, which turns a year old later this month, excludes alcohol, tobacco, gambling, cannabis, oil, gas, and nuclear power equities, among others.

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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.