For investors who are enthusiastic about environmental, social, and governance (ESG) principles and the application of those principles in investment products, it might seem as though what was once a hot concept is cooling off.
A couple of years of anti-ESG rhetoric and high interest rates weighing on growth stocks will do that. However, the outlook for these ETFs, including the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG) and the Invesco ESG Nasdaq 100 ETF (QQMG), is arguably compelling. One reason for that sentiment is adoption. Adoption of ESG funds currently remains low, indicating there’s a lengthy runway for long-term growth in this asset class.
Consider the following: Recent data indicate fewer than 20% of U.S. investors have allocated any capital to ESG-related products. It’s unlikely that all of the roughly 80% of market participants that currently aren’t engaged with ESG will get there. The less than 20% figure confirms there’s plenty of room for growth.
Propellants for QQJG, QQMG
There’s a dichotomy emerging that could work in favor of the asset-gathering efforts of QQJG and QQMG. The current penetration of ESG products is low among investors. But a significantly higher percentage of market participants say that ESG principles are important to them.
“Increased consumer education — especially among younger, more digital-savvy demographics — could close an awareness gap. With consumers prioritizing returns when making investment decisions, ensuring investors are aware that making money and supporting values aren’t mutually exclusive could increase reach,” according to a new Morning Consult poll.
There is another point that works in favor of the long-term adoption of ETFs such as QQJG and QQMG. It’s that many investors who are embrace ESG are devoted to the concept. Additionally, those who are in that camp or close to getting there aren’t deterred by politics or ESG criticism.
“Overwhelming majorities of consumers across the G20 continue to support corporate environmental stewardship,” added Morning Consult. “Public support for racial and gender diversity in corporate management remains strong following a mild rebound over H1 2023.”
Also boding well for potentially positive adoption trajectories of QQJG and QQMG is ESG evolution, meaning investors are demanding more of corporations than just environmental commitments.
“Social issues should also continue to gain prominence on investor agendas, with growing attention to issues such as the privacy and ethical implications of artificial intelligence; racial, gender, and LGBTQ+ diversity; access to affordable housing, healthcare, and education; and the disproportionate social implications of physical climate events and the disproportionate social implications of physical climate events,” noted Morgan Stanley.
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