For public companies, it’s important to have a footprint in environmental, social and governance (ESG) matters, but increasingly, startups are also joining the fray in order to attract investors as well as invest in the subjects that matter to them most.
“There is a whole category of investors now looking to align their investments with their values,” said Tony Stayner, managing director at Excelsior Impact Fund, who spent more than 20 years managing and advising high-growth situations in Silicon Valley and now focuses on impact investing.
“Unleashing market forces by supporting mission-driven companies that accelerate this transformation is a critical strategy, and we all need to focus more of our time, talent and treasure on these efforts, for the clock is ticking,” Staynor added.
This bodes well for ESG as recession fears are creeping into the markets with thoughts of a global downturn and trade wars. As ESG is still trying to gain more traction in the capital markets, can it thrive during a downturn?
Based on a survey of subscribers to Creditflux, an Acuris company, the common notion that investors primarily seek funds for performance didn’t apply to environmental, social and governance (ESG) themed investing. According to 95 survey respondents, only 13 said performance was the main driver.
According to 95 survey respondents, 35 said the primary reason ESG strategies is starting to gain traction in the capital markets is because of demand from institutional investors. In addition, about 25 percent of respondents said their organization was beginning to adopt ESG strategies to enhance their brand.
One ETF to consider is the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE Arca: USSG), which was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The expense ratio for USSG is 0.10%, which is well below the average cost of 0.39% for ESG funds, making it ideal for investors who are also seeking a low-cost solution to add ESG to their portfolios.
While ESG ETFs are still vying for market share in the ETF space, it appears to be progressing with the advent of new products meeting demand. In fact, sustainability is one DWS’ four core values, not only from an investment perspective, but also as a financial market participant.
USSG seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI USA ESG Leaders Index. In order for companies to be included in the fund, the methodology includes a comprehensive screener that filters out alcohol, weapons, gambling, and other controversial products or activities.
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