Incorporating ESG Investments into an ETF Portfolio

Investors interested in socially responsible ETF strategies may consider the quickly developing segment of ESG investing and the opportunities the theme may provide.

On the recent webcast (available On Demand for CE Credit), The Evolution and Expansion of ESG Investing, Jordan Farris, Managing Director and Head of ETF Product Development at Nushares from Nuveen, explained that environmental, social and governance, or ESG, investments come with their own set of risks and opportunities.

The environmental aspect covers factors like climate change, natural resource usage, waste management and deforestation. Social covers employee relations, diversity, supply chain management and health and safety. Lastly, the governance portion includes board quality, executive compensation, public policy and business ethics.

Modern culture is being shaped by the increased emphasis on environment and societal impact. Farris pointed out that investors are incorporating ESG behaviors into everyday activities, with millennials and women among the major adopters. The political environment, regardless of affiliation, is sparking increased investment action in the ESG theme as increased awareness is contributing to an increasing amount of attention to ESG investments. From 2016 to 2017, there was a 15 percentage-point increase in participation in ESG investments.

“Investors want to make a positive impact without sacrificing opportunity for diversified growth,” Brian Griggs, FRM Vice President and Solutions Specialist at Nuveen Solutions, said.

Millennials & Responsible Investing

Griggs pointed out that millennials have exhibited an increased demand for responsible investing, with 92% showing a desire for investments to to deliver competitive returns while promoting positive social and environmental outcomes and willingness to put all of their investment holdings in responsible investments.