Environmental, social, and governance (ESG) funds, such as the FlexShares STOXX US ESG Impact Index Fund (CBOE: ESG) and the FlexShares STOXX Global ESG Impact Index Fund (CBOE: ESGG), have increasingly captive, large audiences. That bodes well for long-term adoption.
The FlexShares ESG ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® USA ESG Impact Index. The underlying 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® USA 900 Index, a float-adjusted market-capitalization weighted index of U.S.-incorporated companies. Under normal circumstances, the fund will invest at least 80% of its total assets in the securities of the underlying index.
“Interest in sustainable mutual funds–also called ESG (environmental, social, governance) funds–has been soaring. The group gathered more than $50 billion in new assets in 2020, more than double the total assets gathered in 2019 and 10 times more than the inflows in 2018,” writes Christine Benz for Morningstar.
Plenty of ESG Enthusiasm
Financial advisors across all channels are increasingly turning toward environmental, social, and governance products as a direct result of heightened client demand for socially responsible investments.
According to a recent Broadridge Financial Solutions survey conducted by 8 Acre Perspective, 61% of financial advisors across wire, regional, IBD, and RIA channels revealed they were using ESG-related products, and the number was even higher among female advisors at 71% and advisors under the age of 40 at 67%.
Among those advisors who are using ESG products in their client portfolios, 81% plan to raise their exposure over the next two years as more investors actively seek out sustainable investments. Sifting through the various channels, the survey results reveal wirehouse advisors are the most likely of all to incorporate ESG products, as they have indicated that both inclusion on their broker-dealer platform and promotion by their home offices were main reasons for doing so.
Important to ESG and ESGG – the FlexShares funds – is that it’s multiple investor groups that are taking a liking to ESG investing.
“Those assets are coming from investors at all life stages, but younger investors appear to have a particular affinity for ESG investing. According to Morgan Stanley research, 87% of millennials (people born between the early 1980s and 2000) say a company’s track record on ESG matters is an important consideration when deciding whether to invest in it,” according to Benz.
For more on multi-asset strategies, visit our Multi-Asset Channel.
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.