If there’s one thing positive to come out of the pandemic, it’s the increased global adoption of environmental, social, and governance (ESG) investing, which further propels a certain FlexShares ETF.

ESG was already increasing its traction in the global landscape, but it got an added boost when COVID-19 entered the scene, according to a 401k Specialist article.

“The coronavirus pandemic has been very good for global ESG, acting as a catalyst for the adoption of environmental, social, and governance (ESG) investing and thematic investment more broadly,” the article explained.

“According to Cerulli Associates’ latest report, Global Markets 2021: Continued Growth in Uncertain Times, while the growth of ESG investing means additional regulation and the need for different skill sets, it is creating new opportunities in terms of both products and markets” the article added.

The rise of ESG only highlights the changing landscape of investing. Investors are concerned with pure profits and making sure that their investments align with their own philosophies regarding ESG principles.

This has been the case for both retail and institutional investors.

“We expect the spread of ESG investing to continue around the world to varying degrees,” André Schnurrenberger, managing director, Europe at Cerulli Associates, said in a statement. “Over the past year, we have seen two key trends in this area. One is that both retail and institutional investors are showing increasing demand for sustainability; the other is that responsible investment products have outperformed consistently, even in the face of significant challenges.”

Capturing ESG’s Global Impact

One way to capture the global impact of ESG is via the FlexShares STOXX Global ESG Impact Index Fund (ESGG). Per the fund description, ESGG seeks investment results that generally correspond to the price and yield performance, before fees and expenses, of the STOXX® Global ESG Select KPIs Index.

The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to ESG characteristics relative to the STOXX® Global 1800 Index, a float-adjusted market-capitalization weighted index of companies incorporated in the U.S. or developed international markets. The fund uses the index as its starting point and then sifts through companies, weeding them out based on the following criteria:

  • Companies that do not adhere to the U.N. Global Compact principles
  • Companies involved in controversial weapons
  • Coal miners

ESGG Chart

ESGG data by YCharts

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