A Holy Call Could Elevate Status of ESG Investing | ETF Trends

The Vatican is advocating that Catholics around the world part ways with fossil fuels investments, a powerful call that could fuel to the fire of environmental, social and governance (ESG) ETFs, including the FlexShares STOXX US ESG Impact Index Fund (CBOE: ESG) and its global counterpart, the FlexShares STOXX Global ESG Impact Index Fund (CBOE: ESGG).

The Vatican’s push comes after globally listed ESG ETFs hauled in $4.33 billion in new assets in May, boosting the year-to-date inflows total north of $28 billion.

A new guide from the Vatican “calls for Catholics to steer their investment dollars away from industries that pollute and toward energy investments that are environmentally sustainable, according to Vatican officials,” reports S&P Global Market Intelligence.

An Inspired Call

ESGG is based on the STOXX Global ESG Impact Index, which screens companies scoring better with respect to a select set of ESG key performance indicators (KPIs), with the bottom 50% of such companies based on their ESG KPI scores excluded from the Index, as are companies that do not adhere to the UN Global Compact principles, are involved in controversial weapons or are coal miners.

Environmental, social and governance (ESG) ETFs are taking off in a big way and an industry leader is promising to offer investors even more avenues for sustainable and virtuous investing.

Institutional investors have been a big driver behind the growth in sustainable investing. In addition, individual investors, especially Millennials and women, are becoming more attracted to the availability and potential benefits of the ESG investment styles. The potential shift in investment demand represents an opportunity for financial advisors with an understanding of the space to provide guidance to clients looking to align portfolios more closely with their individual core values.

“Most U.S. Catholic institutions — orders of priests and nuns, universities, and the dioceses that govern local parishes — have investment portfolios, as do individual Catholics,” according to S&P Global Market Intelligence. “While there is no reliable estimate of Catholic investment power, investors have been moving more rapidly into funds that invest in the stock of companies that meet certain environmental, social, and governance goals. The church’s teaching guidance comes on the heels of the Presbyterian Church in the U.S. and a variety of Christian denominations in the United Kingdom moving to shed fossil fuel stocks in April.”

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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.