As the environmental, social and governance (ESG) investing conversation increasingly shifts to a focus on sustainability, more advisors and investors are evaluating exactly how much their ESG funds deliver on the promise of sustainable exposure.
Part of the elevated emphasis on investments with adequate credibility regarding sustainability includes environmental solutions. In simple terms, the term environmental solutions is broad, encompassing a variety of avenues through which companies can develop products and technologies aimed at making a positive impact in the battle against climate change.
Among exchange traded funds, the Goldman Sachs Future Planet Equity ETF (GSFP) is a prime example of a fund with an impressive environmental solutions resume.
“On the corporates side, we believe there are really three types of companies that are focused on solutions to make positive impacts or reduce negative impacts: start-ups, which largely have been created to develop new products exclusively to find a solution to a problem; companies that were always focused on this and are just now seeing exponential growth; and incumbent players that are changing their behaviors to align with increasing focus on environmental solutions,” notes Alexis Deladerriere, Head of International Developed Markets Equity in Goldman Sachs Asset Management’s Fundamental Equity business.
Because many start-ups are still privately held, those firms don’t reside in GSFP’s portfolio. However, the Goldman Sachs ETF is actively managed, meaning it can embrace younger public companies that are on the cusp of significant growth in the environmental solutions space as well as older, established firms that are making related inroads.
Other elements to consider are the global nature of the environmental solutions industry as well as the role government spending plays in advancing this space. Those are themes GSFP can rapidly adapt to because it’s not constrained by an index.
“Policymakers around the world have played a critical role in curbing activities with a negative environmental impact via taxation and regulation, while at the same time incentivizing the development of alternative solutions. For example, the European Emissions Trading Scheme, which covers 40% of EU emissions, has been successful in reducing these emissions by 35% over the past 15 years. In the U.S., we’re beginning to see local policies banning certain types of single-use plastic items,” adds Deladerriere.
Home to nearly $188 million in assets under management, GSFP holds 53 stocks. Roughly 60% of that lineup comes by way of companies based out of North America.
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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.