Advisors and investors continue hearing more about environmental, social, and governance (ESG) investing. That’s not idle chatter. Rather, it’s supported by some of the most impressive growth projections in the investing universe.
Those rosy forecasts could be a sign that exchange traded funds, such as the Goldman Sachs Future Planet Equity ETF (GSFP), are ready to boom. The estimates could also signal that some new ETFs in the category, of which GSFP is one, will prove to be well-timed additions to the fund landscape.
“Sustainable investing worldwide stands at $8 trillion today and could reach $30 trillion by the end of the decade, a new assessment shows,” reports Evie Liu for Barron’s.
Obviously, $30 trillion is a massive number. It’s more than 10 Apples (NASDAQ:AAPL). Even if that estimate falls several trillion dollars short, it still indicates that there’s plenty of room for upstarts like GSFP to grab slices of the growing ESG investing pie. It’s fair to say that the Goldman Sachs ETF is already doing just that. GSFP debuted in mid-July and already has north of $106 million in assets under management. That’s one sign that GSFP is a well-timed rookie ETF.
“From January through September, investors had poured $577 billion into mutual funds and exchange-traded funds dedicated to environmental, sustainable and governance—far exceeding the full-year total of $355 billion in 2020,” according to Barron’s.
One of the predictable results of more inflows to ESG funds is that issuers are bringing more of those products to market. However, advisors are finding that many ESG funds do more than employ exclusionary tactics (excluding, say, tobacco or gambling stocks), while others are complex and lack adequate ESG scoring.
GSFP avoids those issues because it focuses on climate sustainability by building a portfolio of companies dedicated to reducing carbon emissions. Additionally, GSFP is actively managed, indicating that its managers can potentially add value while not having to worry about catering to index constraints. Those are relevant traits at a time of increasing scrutiny for ESG funds.
“As the sustainable investment business grows larger, fund managers are facing ever more complex challenges and stricter scrutiny. Investors want better products beyond vague languages and a few exclusionary screens. And the huge opportunity means competition for new assets would be even more fierce,” notes Barron’s.
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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.