Despite Controversies, ESG Has Staying Power | ETF Trends

In recent months, criticism aimed at environmental, social, and governance (ESG) investing has mounted, with allegations of greenwashing trending higher.

New investment concepts often encounter critiques and resistance, but investors of all stripes — institutional, advisors, and retail — are embracing ESG funds. That is a sign that debate about this investment strategy is healthy, and that’s a positive for exchange traded funds such as the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST). In fact, although JUST is seasoned by the standards of ESG ETFs, it could be one of the ideal options for “ESG 2.0.”

“The second sphere of thought is that ESG aspects, by their nature, are externalities to the business, and accepting responsibility for externalities is inherently a cost and drag on financial performance. With roots in the ideals of Milton Friedman, this viewpoint argues that consideration of ESG aspects by businesses can only be financially beneficial when governments create penalties or incentives,” write Todd Cort and George Kell in an op-ed for Barron’s.

The Goldman Sachs ETF follows the JUST U.S. Large Cap Diversified Index, which provides the depth necessary for investors to capitalize on the next evolution in ESG investing.

“JUST Capital collects and analyzes data from a diverse range of sources, utilizing over 145,000 data points across 88 unique metrics to score the performance of Russell 1000 Index companies across a variety of issues, including worker treatment, customer concerns and environmental impacts,” notes Goldman Sachs Asset Management (GSAM).

Speaking of depth, JUST has a deep bench of 451 stocks. To some investors, that may be just a number, but with JUST, it’s more, because the deeper an ESG fund is, the less vulnerable it might be to some of the inefficiencies still present in the ESG marketplace.

“ESG represents an enormous and complex system of novel factors for markets. From the uncertainty around climate impact, to the consequences of ecosystem collapse, resource depletion, social instability, and political upheaval, global ESG factors are the epitome of information that will be interpreted differently by market players, resulting in inconsistent pricing,” according to the Barron’s opinion piece.

JUST has other benefits. Notably, it allocates almost 29% of its weight to tech stocks. While that’s roughly market weight, it’s advantageous because digitization is at the center of climate-aware and decarbonization efforts.

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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.