Data confirm advisors and investors continue embracing environmental, social, and governance (ESG) exchange traded funds in a big way.
That could potentially prove beneficial for a new suite of ESG model portfolios from WisdomTree. The issuer’s dedicated ESG model portfolios debuted earlier this month as the latest additions to an already impressive basket of model portfolios. With allocations to ESG ETFs reaching record highs again last month, the timing couldn’t be better for advisors.
ESG “ETFs and ETPs listed globally reached a record of US$280 billion at the end of May 2021. ESG ETFs and ETPs listed globally gathered net inflows of US$6.54 billion during May, bringing year-to-date net inflows to US$73.95 billion which is much higher than the US$26.42 billion gathered at this point last year,” according to ETFGI, a London-based ETF research firm.
Model Portfolios Getting In On the Act
WisdomTree’s ESG model portfolio offerings feature an all equity portfolio as well as moderate and aggressive sleeves featuring varying degrees of fixed income exposure. In other words, two of the three WisdomTree portfolios answer a query many advisors are fielding today: are ESG principles accessible in the fixed income space?
The moderate portfolio is a 60/40 equity/fixed income split while the aggressive sleeve allocates a quarter of its weight to ESG bond ETFs or those that score well on ESG metrics.
Another reason the WisdomTree model portfolios could prove well-timed is that amid rising investor enthusiasm for ESG funds, ETF issuers are rapidly populating a once sparsely-populated corner of the ETF universe.
“Since the launch of the first ESG ETF/ETP in 2002, the iShares MSCI USA ESG Select ETF, the number and diversity of products have increased steadily, with 620 ESG ETFs/ETPs and 1,834 listings globally at the end of May 2021. During May, 18 new ESG ETFs/ETPs were launched,” adds ETFGI.
Nevertheless, confusion about ESG scoring is still prominent. More education is needed in the space.
“Confusion persists around what constitutes an ESG fund. According to PRI, a UN-supported initiative which seeks to understand the investment implications of ESG issues, 56% of adopters believe there is a lack of clarity in ESG definitions,” notes ETFGI.
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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.
