Four ETF Options That Take Future ESG Risk Into Account

Environmental, social, and governance (ESG) investing has seen exponential growth over the past years. While it presents an opportune growth strategy, the question investors need to ask is whether the strategy they’re using addresses future risk.

A FlexShares article identified three ways to assess future sustainability:

  1. Analyzing future carbon risk: a forward-looking assessment of future carbon risk
  2. Emphasizing corporate governance: how a company is managing sustainability issues effectively
  3. Using a consistent, forward-looking risk assessment framework for all ESG issues: utilizing best practices for companies to mitigate climate-related risks

Furthermore, to get ESG exposure while also addressing future risk, FlexShares has three exchange-traded funds (ETFs) to consider. Whether it’s bonds or equities, investors can choose the asset class they wish to focus on while maintaining ESG exposure.

ESG Exposure in Equities and Bonds

ETF investors can get exposure to the ESG space with four funds from FlexShares: the FlexShares ESG & Climate US Large Cap Core Index Fund (FEUS), the FlexShares ESG & Climate Developed Markets ex-US Core Index Fund (FEDM), the FlexShares ESG & Climate Investment Grade Corporate Core Index Fund (FEIG), and the FlexShares ESG & Climate High Yield Corporate Core Index Fund (FEHY).

The introduction of equities has already been a prevailing part of the ESG trend, but fixed income is now following suit. However, finding funds that address both asset classes specifically in the climate control arena can be a trying task.

“That’s why FlexShares has developed a new suite of ESG-oriented ETFs. Each of the four funds targets a different core equity or fixed-income asset class,” a Flexshares Fund Focus said. “All employ our sophisticated, proprietary risk-assessment methodology to seek an overall improvement in the portfolio’s ESG score, with additional emphasis on reducing carbon risk versus the benchmark. These improvements are designed to have minimal tracking error, so they can help deliver the market exposures that investors expect from their core investments.”

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