Despite the crowing against environmental, social, and governance investing from some opportunistic politicians, ESG investing is gaining in popularity among investors. A new study by PwC shows that nearly 9 in 10 institutional investors (88%) believe asset managers should be more proactive in developing new ESG investment products.
“ESG has become perhaps the most powerful driver of growth in asset and wealth management,” said Olwyn Alexander, global asset & wealth management leader at PwC Ireland. “The surge in demand for ESG investments highlighted in our survey exceeds almost all previous expectations.”
Speaking with Yahoo! Finance Live to discuss ESG investing opportunities in the era of climate change, Columbia Business School Professor of Professional Practice and Faculty Director Bruce M. Usher said that “ESG investing is really very simple.” When looking at a potential asset to invest in, ESG investing is looking at what could put that investment at risk, like flooding, hurricanes, or wildfires. For example, if someone were to consider buying a second home on the coast, it would make sense to know the likelihood of that house flooding.
“That’s what EGS investing is. It can make you a better business manager. It can make you a better investor,” Usher said.
Usher also noted that impact investing is rising because of macro trends “all pushing in the same direction.” And investors are “looking at those trends.”
“We know the climate science,” he said. “We know that, after 300 years of building a global economy that’s putting emissions in the atmosphere, we’ve got 30 years to decarbonize to avoid catastrophic climate change.”
The Xtrackers Net Zero Pathway Paris Aligned U.S. Equity ETF (NYSE Arca: USNZ) provides large- and mid-cap U.S. equity exposure aligned with an internationally recognized framework and is designed to capture the move of the global economy to a net-zero emissions environment.
Launched in June, USNZ is designed to align to transform economies to net zero. It provides exposure to a unique Paris Aligned Benchmark (PAB) index that uses a transparent set of rules aiming to be at the cutting edge of sustainable investment practices.
The index is designed to provide a 50% reduction in carbon intensity versus a market capitalization-weighted U.S. equity index and a carbon intensity reduction trajectory of 7% year-over-year. It provides an evidence-based, statistically driven “pathway” to net zero, aligned with the Paris Climate Accords and their two main objectives: to achieve a net-zero emissions economy by 2050 and limit the rise in global temperature to 1.5°C above pre-industrial levels.
“There is a clear need for investments that align with net zero aims,” said Arne Noack, head of systematic investment solutions, Americas, at DWS, in a news release announcing the fund’s launch. “USNZ provides a powerful net zero investment strategy that meets the latest regulatory standards that govern Paris aligned benchmark indices as defined above.”
In addition to meeting PAB regulations, the index also aims to comply with recommendations published by the Institutional Investors Group on Climate Change (IIGCC), specifically its Net Zero Investment Framework.
USNZ has an expense ratio of 0.1%.
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